Australia's miners are acting as a drag on the broader market today with BHP Billiton Limited (ASX: BHP) one of the biggest casualties.
One of the primary reasons behind today's selloff can be attributed to further weakness in oil prices overnight. Brent crude oil, which is the global benchmark, fell 1.6% to US$46.80 a barrel, while West Texas Intermediate fell 2.4% to US$42.92. This was likely a result of surging US inventories, sparking fears of a prolonged glut in the global market.
At the same time, iron ore rose 0.9% to US$51.50 a tonne, according to The Metal Bulletin, although the commodity is tipped to fall in the near future. Indeed, Goldman Sachs is amongst the iron ore bears, as is Citigroup, which believes iron ore will be worth just US$40 a tonne early next year.
Iron ore and petroleum are BHP Billiton's two most important commodity markets, so it's hardly surprising to see the shares down 2.4% today at $23.75. Rio Tinto Limited (ASX: RIO) is also down 1.4%, while energy producers Santos Ltd (ASX: STO) and Senex Energy Ltd (ASX: SXY) are down 3.3% and 7.5% respectively.
Ordinarily, a 7.1% fully franked dividend yield from a blue-chip company like BHP Billiton would be in high demand from the market, but it seems investors are more focused on the headwinds facing the business (and rightly so). If commodity prices do fall further, earnings growth will become even more difficult to come by and that dividend yield may yet prove unsustainable.
I'm not buying shares of BHP Billiton, and believe there are far better opportunities to explore today.
