BHP production report not good enough to calm resource stock jitters

Overall BHP’s production result has not been good enough to turn around the negative sentiment towards materials sector in evidence yesterday. The stock market has opened nervously again this morning as traders contemplate the possibility of a pullback in the ASX 200 index after recent solid gains

The stock market has opened nervously again this morning as traders contemplate the possibility of a pullback in the ASX 200 index after recent solid gains

Early signs are that the US profit reporting season is doing a bit better than analyst expectations. A clear majority of major companies have reported positive earnings surprises at this stage. However, the market had run up in advance of this and the beat on expectations has so far only been good enough to hold the line for the overall market.

Yesterday’s trading on the ASX featured a negative performance by the major mining stocks and banks. This was offset by gains in most other sectors. This suggests index related selling. Whether there is more of this activity today will probably hold the key to how the index finishes

BHP’s production report is broadly in line with expectations. The company continues to aim at grinding out cost savings and minor production increases against a background of commodity price uncertainty. As generally expected, BHP is forecasting lower US oil production next year as it chooses to reduce production until prices improve. The legal position over BHP’s Samarco liabilities continues to remain a risk. Overall BHP’s production result has not been good enough to turn around the negative sentiment towards materials sector in evidence yesterday.

Yesterday’s RBA statement focussed market attention more directly on its August meeting by specifically mentioning its assessment of data on inflation and the economy due to  be received prior  to that meeting. This has helped provide support for some sectors of the stock market via a weaker currency and lower bond yields