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Reduced volatility and BHP's plans stop the rot

In what could be a significant development, the volatility came out of US stock markets last night. This creates the potential for the S&P 500 to form a base above 2400, making a significant risk off correction less likely. However it’s early days and while markets have settled, caution prevails. There is not yet any evidence of aggressive bargain hunting.

Even so, this more settled mood in US markets together with BHP’s announcement that they are actively pursuing sale of their US shale oil assets, has been enough to deliver a firm open for the ASX 200

The market has looked past one off increases in BHP’s costs last year and a dividend payment below the more optimistic expectations, to focus on the future. The announcement that BHP will actively pursue an exit from its US shale oil assets has been well received. This is a positive indication for BHP’s future under the Chairmanship of Ken McKenzie who had an excellent record of creating shareholder value at Amcor. The announcement has been enough to support BHP above the neck line of a head and shoulder chart pattern

The rally in mining stocks this morning has been relatively muted given overnight gains in metals prices. This reflects investor concerns that the rally in metals may be getting to the higher risk stage with prospects for further improvement in demand limited in the near future.  

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