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BHP flags structure changes

mining truck at a mine

The S&P/ASX 200 closed up on Thursday, gaining 35.50 points or 0.48% to 7474.40. Heavy rains disrupted south eastern Brazil’s iron ore industry, with Vale, the world’s second-largest producer, among companies halting operations and regulators sent to monitor the impact on tailings dams, reports Bloomberg. Iron ore prices rallied on the news and miners lifted during the ASX session. Rio Tinto gained almost 5%.

The Australian Financial Review reports that the super-sizing of BHP within Australia’s flagship market indices will occur in a single trading session if the company’s structure is unified next week, despite index manager S&P Global conceding the change would create “material” turbulence on the local market.

BHP’s weighting in the benchmark S&P/ASX200 index will rise to about 10% from about 6.2% if shareholders approve a plan for the miner to consolidate its dual-listed company structure within a single Australian-listed company. The increased weighting within ASX indices would compel many Australian investors to find spare cash to buy BHP shares to comply with their index-linked mandates. Index manager S&P Global told investors in December that “material” volatility in trading volumes would occur if the market were forced to absorb BHP’s unification in a single day.

S&P floated an idea with investors in recent weeks to stagger the impact of BHP’s unification over two trading sessions: January 31 and March 21. But on Wednesday S&P said it had decided to implement the changes “all at once” before the January 31 trading session, if BHP shareholders approve unification on January 20.

Blackstone has made a revised non-binding takeover proposal for Crown Resorts of $13.10 a share, an increase of 60¢ a share from the previous offer of $12.50. Crown said if Blackstone makes a binding offer at no less than $13.10 cash per share, Crown’s board said in a statement to the ASX that its current unanimous intention is to recommend shareholders vote in favour of the proposal, in the absence of a superior bid. Crown shares gained almost 8%.

The Australian Financial Review reports that the mining chief driving Western Australia’s next major lithium project has shot down the prospect of soaring prices spurring an oversupply. Perth-based Liontown Resources on Wednesday announced a binding offtake agreement with LG Energy Solution for lithium spodumene concentrate from its $473m Kathleen Valley project. Shares in the $3.4bn miner jumped 5% to $1.63. In the previous lithium boom, prices crashed amid fears of a looming supply glut. But in the past 18 months, demand has soared and brokers have continued to raise their price forecasts, with Macquarie analysts in late December increasing their 2023 to 2025 bets for regional prices by 12 to 22%.

In the US

US stocks traded higher on Wednesday after the inflation report was released but by the close, the Dow Jones was up 40 points after rising almost 200 earlier, while the S&P cut gains to 0.3%, and the Nasdaq Composite to 0.2%. The annual inflation rate in the US accelerated to 7% in the last month of 2021, a fresh high since June of 1982, in line with market expectations and compared to 6.8% in November. Inflationary pressures are likely to last well into the middle of 2022 and US Federal Reserve Chair Jerome Powell recently pledged to do what’s necessary to contain an inflation surge including increasing interest rates. The inflation figures were in line with forecasts, easing concerns that the Fed will need to tighten faster than earlier announced.

Oil

WTI crude futures increased more than 1% to above $US a barrel on Wednesday, the highest in over two months, amid a dollar weakness, prospects of strong demand and a fall in US stockpiles. EIA data confirmed crude stocks in the US fell for a seventh consecutive week and much more than market forecasts. The US Energy Information Administration also raised its oil demand forecasts by 840,000 bpd in 2022, compared with its previous estimate of 700,000 bpd. Brent crude oil was higher at $US84.91 a barrel.

Bitcoin

Bitcoin briefly climbed above $US44,000 for the first time in a week as the most US inflation in four decades revives the debate about whether the cryptocurrency is a hedge against rising consumer prices, writes Bloomberg. The largest digital asset by market value rose as much as 3.3% to $US44,085, following the release of the consumer price index, which climbed 7 per cent in 2021.

AUD/USD US72.84c

Bitcoin $US43,750

Gold $US1825.99 an ounce

Brent crude oil $US84.91 a barrel

WTI crude oil $US82.92 a barrel


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