BHP’s record result fails to impress and another banking downgrade


The S&P/ASX 200 index (Index: ^AXJO) (ASX: XJO) closed down 17.2 points, to 4,123.6, a fall of 0.4%. The market was dragged down by the big miners, and was less impressed that its Wall Street counterpart, by US congressional testimony, given by Federal Reserve Chairman, Ben Bernanke.

Australian economic conditions are at their strongest in 10 months, according to the Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity, meanwhile the Australian dollar continues to rise, likely due to increased optimism in money markets, and is currently trading just above 103 US cents.

Company news

Rating agency Moody’s Investor Service has cut Bank of Queensland Limited’s (ASX: BOQ) rating from A3 to Baa1, due to the depressed state of the property market and earnings challenges faced by regional banks.

Asciano Limited (ASX: AIO) has flagged plans to spend $348m to expand its Port Botany facility with more automation, but 270 jobs will be lost once the project is completed in 2014. Chief executive, John Mullen has said that the introduction of automatic stacking cranes could increase capacity at the terminal beyond 2014 by 75% a year.

Shares in Gerard Lighting Group Ltd (ASX: GLG) have soared more than 26%, after the board recommended shareholders accept a $1.05 per share takeover offer from Champ Private Equity.

Metal Storm Limited (ASX: MST) shares have been placed in a trading halt, after Luxinvest Capital Advisors withdrew from a deal to contribute equity into the defence technology company. The deal was to raise around $4.5m to pay off debt and provide further working capital.

BHP Billiton Limited (ASX: BHP) share’s have been punished, despite a record production result. The company increased iron ore production to 159.5 million tonnes, 19% higher than the previous year. Investors appear to be deserting resource stocks because of their unwillingness to pay decent dividends. At the close, BHP shares were trading at $30.18, down almost 2% and not far off 52 week lows of $30.09.

Winners and losers

Incitec Pivot Limited (ASX: IPL) and Lend Lease Group (ASX: LLC) were the big winners amongst the majors, rising 2.9% and 2.1% respectively.

Resources stocks were hammered, with Alumina Limited (ASX: AWC), Fortescue Metals Group Limited (ASX: FMG), Rio Tinto Limited (ASX: RIO) and Newcrest Mining Limited (ASX: NCM) all posting falls of more than 3%.

Foolish takeaway

Falling commodities prices are hurting our resources companies, despite record production volumes. Investors may also be worried about Chinese demand falling and the negative impact that is likely to have on commodity prices. The big miners don’t appear to be much concerned, instead focusing on the longer-term, as should we fellow Fools!

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More reading

Motley Fool writer/analyst Mike King owns shares in BHP. The Motley Fool‘s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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