BHP bids $38.8 billion for Anglo American in copper megadeal

UK Stocks Rally as BHP Bids for Anglo American

The London market is suddenly coming alive! We’ve been talking at length about the problems facing the market and now it’s roaring – a new record close for the FTSE 100 index has been followed up with fresh gains to a fresh intra-day high at 8,098 this morning.

But now a top company, British mining multinational Anglo American, may be taken out. Oh dear – more flight from the City to create much navel-gazing and angst. A usual story of beaten-down valuations and a foreign investor looking for value and some prized assets.

BHP Deal Would Create World’s Largest Copper Mining Firm

Australian-listed BHP Group made an offer for the UK-based Anglo American for £31bn — Anglo is reviewing the deal, which would create the world’s largest listed miner and copper producer. Let’s face it, this is a monster.

Anglo shares jumped 11% at the open. Anglo has not had a great year – the rally this morning has erased the losses of the last 12 months, just. It’s got the assets but is not maybe doing as well as it might; in December the company downgraded its production targets.

BHP clearly wants the copper assets – it's not long after buying Oz Minerals. Copper prices have rocketed this year, with analysts anticipating that the commodity’s rally will continue on supply concerns and heightened demand for metals critical to the energy transition. Two weeks ago, City analysts said they believe this century’s second copper bull market is currently underway — roughly two decades after the first such cycle. 

Clearly, competition authorities would take note due to the position in copper a combined company would have. South African platinum and iron ore assets would be spun off, which could be politically sensitive.

If BHP doesn’t make it work, others may try. Anglo American shares trade at £24.80, a little shy of the £25.08 implied by the offer – not much discount, suggesting it’s a) being treated seriously and b) could go higher.

BHP boss Mike Henry has previously said he will take a disciplined approach to M&A – bulging coffers thanks to bumper profits in recent years may test that resolve. Long-term mega trends suggest demand for metals is only going to increase.

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Meta Stock Falls on AI Spending Plans

Meta shares plunged 15% after-hours as investors balked at spending plans. The year of efficiency that investors absolutely loved is giving way to a couple more years of mega-spending. “We build out the inventory first and then we monetize it,” said Zuckerberg.

Revenue growth accelerated to 27% but the company raised its capex guidance from $37bn to $40bn and said it will rise again next year. Zuck is bored with being efficient with his capital; back to spending.

In fairness, Meta has to try to keep up or be left behind. Long-term, this may be the right call having got investors on the side. Wall Street finished the session flat, but futures came off a bit after-hours on the Meta numbers.

Boeing Shares Slide on Q1 Losses

Boeing earnings weren’t that bad — but still bad: the aerospace giant lost $355 million in the first quarter, down from a $425 million loss a year earlier. Revenue dropped 8%. Boeing stock closed close to 3% down on the day.

More on Tesla: BofA says the earnings update “addressed key concerns ... and revitalized the growth narrative” with new model launches, robotaxi, cost savings, and the potential licensing of FSD, but admitted that “the combination of all of these may not structurally change the long-term path of the company”.

Tesla shares finished the day up 12%. “In the near-term, the tide in news flow appears to suggest the risk to the stock is skewing more positively,” says BofA.

Bernstein seemed less impressed:

“We struggle with why TSLA needs a discrete robotaxi offering, and we believe the widespread deployment of FSD is 5-10 years away”. 

Where Next, Bank of Japan?

Yesterday the Japanese yen surged above the 155 mark against the dollar – a line in the sand that seems to keep moving. The initial break was promptly smacked back down, but the dam soon burst and USDJPY is headed to 155.70 — we are getting nearer to the inevitable. Talk of yen intervention has been rife for multiple weeks, with Japanese officials offering up “jawboning” in attempts to shore up the currency.

The Bank of Japan (BoJ) could take a lesson from Indonesia, which surprised markets with a rate hike to shore up the sliding rupiah. Bank Indonesia (BI) raised the 7-day reverse repurchase rate by 25 basis points to 6.25%. The BoJ is due to meet on Friday.  Today is the US GDP and weekly claims data.

Lots of chop at 155 yesterday afternoon but the move has stuck.

Bonds on the Move, GBP Rallies

Bond markets are on the move, pushing the dollar down against its peers. UK 10-year gilt yields rose about 10bps to 4.35%, the highest since November. Cable rallied to its best in two weeks. MACD tentative bullish crossover.

Similar moves were noted on Italian and German debt as yields rose to the highest in 5 months. EURUSD also touched its best in a fortnight, hitting 1.07 and bouncing clean off the 21-day EMA but holding the move above the 50% retracement for now. MACD bullish crossover marked.

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