A rising iron ore price and encouraging news emerging from China have once again aided shares in BHP Billiton Limited (ASX: BHP) move slightly higher today, up 19c or 0.5%. In comparison, the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) has dropped 0.3% for the day so far.
Although the stock still sits 3.6% down since the beginning of 2014, it has shown promising signs over the last week or so, having climbed 4.3% in that time. Here are three reasons why the stock could be moving upwards today…
- Investor confidence in the sector has been boosted by a minor recovery in the iron ore price recently after it jumped a further 1.4% overnight to trade at US$93.40 a tonne. Although that price is still well below its 2013 average (roughly US$135 a tonne), there were concerns that it could fall as low as US$80 in the coming months. A higher iron ore price translates into greater margins for the miners producing the resources.
- Preliminary data on China's manufacturing sector also indicated expansion in the country's factory activity for the first time in six months which would bode well for Aussie iron ore miners like BHP, Rio Tinto Limited (ASX: RIO), and Fortescue Metals Group Limited (ASX: FMG).
- The latest RBA minutes released indicated interest rates are to remain low for some time yet. While plenty of other Aussie blue chip stocks have become wildly overpriced, investors may have become more attracted to BHP Billiton's forecast 3.5% fully franked dividend.
BHP Billiton is certainly one of my favourite mining stocks thanks to its high level of diversification and strong long-term prospects. Although I think investors who remain patient should be rewarded in the long run, I also believe the iron ore price will slip further from today's levels which would likely give investors an opportunity to buy the stock even cheaper.
