Mining giants BHP Billiton and Rio Tinto slash dividends │ TEAM Asset Management weekly market commentary

TEAM Asset Management global weekly market review for week commencing 20 February 2023. TEAM Asset Management is a Jersey-based independent asset management company of AIM-listed parent, TEAM plc (LON:TEAM).

Global stocks endured their worst week of 2023 so far as economic reports revealed that central banks still have more to do to tame inflation. The blue-chip S&P 500 and technology focussed Nasdaq indices fell 2.4% and 2.7% respectively.

Markets had got off to a fast start this year but the rally has lost momentum as better than expected economic data, and disappointing inflation reports, have led investors to reprice the risk that interest rates will go much higher.

On Friday it was revealed that the US personal consumption expenditures (PCE) price index, the Federal Reserve’s favoured measure of inflation, increased by 5.4% from a year earlier in January. Analysts had expected it to slow further from the revised 5.3% level in December.

The index is important as consumer spending accounts for more than two-thirds of the US economy. Multi-decade low unemployment has underpinned higher wages, enabling consumers to spend more on goods and services despite the price increases.

Futures markets now expect the Federal Reserve to respond to the data with three more quarter point interest rate hikes by the summer. At the start of February, just one more rate hike was priced in.

Earnings reports from mining giants BHP Billiton and Rio Tinto also weighed on sentiment last week. BHP reported pre-tax profit fell 30% to $10.2 billion in the second half of 2022 and cut its dividend from a record $1.50 to 90 cents a share. The Australian group blamed a combination of lower commodity prices and around $1 billion of cost inflation, mainly from higher diesel costs. However, it is hopeful recovery in demand from China, particularly for iron ore used to make steel, will improve performance this year. Iron ore accounts for more than half of BHP’s earnings.

Rio announced it will cut its dividend by more than half after full-year pre-tax profit fell 40% to $18.6 billion. The world’s second-largest miner cited similar reasons for the drop and is also pinning its hopes on the re-opening of China’s economy to offset slowdowns in the US and Europe.

Chief executive Jakob Stausholm also asserted that the company will benefit from the global transition to clean energy. Rio is actively seeking to expand its lithium business and it paid $3.3 billion in December to buy out Turquoise Hill to give it greater control of Oyu Tolgoi in Mongolia, one the largest copper mines in the world.

There was, however, some positive news for companies to report. British Airways’ parent International Airline Group reported its first annual profit, €1.3 billion, since the start of the pandemic. Eurpoe’s third largest airline expects to operate 98% of its pre-pandemic schedules this year to take advantage of “robust” forward-bookings and announced it will pay €400 million for the 80% of Spain’s Air Europa that it doesn’t already own.

Rolls-Royce is another beneficiary of the strong rebound in the demand for travel and its shares jumped more than 23% on Thursday after it reported a 57% increase in operating profit to £652 million. It gets paid through long-term contracts based on hours many hours its Trent jet engines are in the air. New CEO, Turan Erginbilgic, also pledged to tackle years of underperformance at the British engineering group by reducing working capital, improving efficiency and implementing a change in culture.

HSBC shareholders had a good week too. The UK and Hong Kong-listed bank raised its dividend to the highest level in 4 years after reporting its fourth-quarter pre-tax profit almost doubled to $5.2 billion. In a bid to appease China’s Ping An insurance group, who is pressuring the bank to split its Asian and Western operations, HSBC also revealed it is planning to distribute a special dividend once the sale of its Canadian business goes through.

The prospect of more interest rate hikes continued to weigh on energy markets and Brent Crude slid another $2 to $82 a barrel. A report from the US Energy Information Administration also revealed crude oil inventories increased to 479 million barrels, around 9% above the five-year average for this time of year.

BHP Billiton and Rio Tinto slash dividends

TEAM plc (LON:TEAM) is building a new wealth, asset management and complementary financial services group. With a focus on the UK, Crown Dependencies and International Finance Centres.

Author: Andrew Gillham, Senior Investment Manager, TEAM Asset Management (andrewgillham@team.je)

Click to view all articles for the EPIC:
Or click to view the full company profile:
Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Team plc

More articles like this

Team plc

TEAM acquires leading advisory business, Globaleye Wealth Management Group

TEAM plc (LON:TEAM), the wealth, asset management and complementary financial services group, has announced that it has acquired the entire issued share capital of Globaleye BVI, the parent company of the Globaleye Wealth Management Group. Globaleye is an international wealth management business,

Team plc

TEAM to acquire Thornton Chartered Financial Planners

TEAM plc (LON:TEAM), the wealth, asset management and complementary financial services group, has announced that it has conditionally agreed to acquire the entire issued share capital of Thornton Associates Limited, trading as Thornton Chartered Financial Planners for a consideration of up to

Team plc

Fears over a possible US default are justified, and real

Bifurcated: divided into two branches or parts (Merriam-Webster) On the LHS is not the share price of a MEME stock but illustrates the recent parabolic move in the yield of the 3-month US Treasury bill (yields move inversely prices),

Team plc

The Domino Effect

The US regional banking sector currently finds itself under significant strain, with smaller players facing several significant headwinds: All told, the profitability path looks set to trend down sharply. Silicon Valley Bank, Signature Bank and First Republic Bank

Team plc

Rangebound

Markets struggled to make significant headway for the third week in a row. All major developed markets finished the week fractionally down, reflecting mixed signals coming from a range of technical and economic indicators. Positive share price moves

Team plc

What the US economic data is telling us right now

That the Fed took the decision to enact a further 25 basis point rate hike, after the banking turmoil triggered by SVB, is instructive as to how far inflation remains over what would be considered a ‘comfortable level’

Team plc

TEAM plc Craig Farley reading a market of mixed signals (VIDEO)

TEAM plc (LON:TEAM) Head of Multi Asset Investments Craig Farley discusses market performance. In this interview Craig explains what shaped market performance in Q1, the signals he is keeping a close eye on that will determine asset price performance

Team plc

TEAM plc Investment Review & Outlook 1st Quarter 2023

Major Asset Class Returns for 1st Quarter 2023, GBP sterling terms. (Source: Bloomberg, TEAM) Global Equity Sector Returns for 1st Quarter 2023, GBP sterling terms. (Source: Bloomberg, TEAM) Investment Review & Outlook 1st Quarter 2023 Heartburn Headline returns

Team plc

JCAP Treasury Services appoints Executive Director

JCAP Treasury Services, part of Team, have announced that Andy Skimmings has been appointed as an Executive Director to focus on new business development and risk management. Operating from offices in St Helier, JCAP deliver technology-based solutions for

Team plc

More turmoil for banks TEAM plc

Markets endured another volatile week as banks lurched from one crisis to another. Investors sought refuge in tradition safe-haven assets, government bonds and precious metals, before appetite for risk recovered. The blue-chip S&P 500 index ended up 2.5%

Team plc

TEAM plc: Inflation Shocker

A hot UK inflation print this morning has jolted markets, triggering a swift repricing of the odds of an interest rate hike at tomorrow’s Monetary Policy Committee (MPC) meeting. The Consumer Prices Index (CPI) unexpectedly accelerated to 10.4%

Team plc

We’ve come a long way baby TEAM plc

It is a little over a year since the Fed (rather belatedly) introduced its first interest rate hike of this cycle. At the time, consensus expectations were for the Fed Funds rate today to be under 2%. We

Team plc

Silicon Valley Bank collapse roils markets

The sudden collapse of Silicon Valley Bank caused investors to flee risk assets and seek shelter from the storm in safe haven government bonds last week. The blue-chip S&P 500 and technology focussed Nasdaq indices fell 4.8% and

Team plc

Will the Fed blink?

In the wake of recent events, sell side forecasters have been scrambling to (re)adjust their view on the USFederal Reserve’s likely course of policy action. From a state of almost universal agreement a week ago, the potential range

No more posts to show