What happened to BHP’s share price?
BHP Billiton Ltd [ASX:BHP] is trading 2.6% lower today at $32.48.
The stock is now down 13.8% over the past year, although it has recovered from its January lows and is up 10% since January 2.
Why are BHP shares lower?
Today’s drop comes after ratings agency Standard & Poor’s downgraded its outlook on the stock from stable to negative.
The fall comes despite a bounce in the iron ore price overnight. Iron ore rose 2.8% on news that Brazilian iron ore producer Vale said that it would reduce its iron ore production by as much as 30 million tonnes if iron ore prices don’t recover.
What now for BHP Billiton Ltd?
BHP now faces the prospect of its credit rating being downgraded. S&P have, for now, maintained its A1 rating on BHP, but warn the company has been put on a ratings watch. The agency questions why BHP is not only maintaining, but also increasing its dividend payouts, given low commodity prices and a challenging operating environment.
However, S&P do see scope for the company to further reduce its operating costs and capital expenditure to conserve cash while commodity prices are low.
for The Daily Reckoning Australia