It's been a remarkable day for Australian investors with the local stock market up a staggering 2.4% in late afternoon trade. However, its been an even better day for those investors who own BHP Billiton Limited (ASX: BHP) which has surged more than 5%, rising as high as $32.28.
Here are three reasons the stock might be jumping today…
- Expectations. BHP Billiton's primary rival, Rio Tinto Limited (ASX: RIO), delivered a stronger-than-expected earnings report yesterday, whilst also announcing a US$2 billion share buyback. Investors will be hoping for something similar from BHP Billiton when it reports later in the month.
- Gushing oil. Oil prices rose nearly 5% overnight with fears easing over the market's oversupply situation. Oil is BHP Billiton's second-biggest generator of earnings, right behind iron ore (which is also trading at a heavily depressed price right now).
- Australian dollar. Given that most commodities are quoted in terms of US dollars, miners rely on a weak Australian dollar (or a strong US dollar) to boost their earnings. The Australian dollar is now trading below US78 cents and will likely fall below that level in the near future with calls for more interest rate cuts.