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Mike van Dulken, Head of Research at Accendo Markets, commented:
Rio Tinto’s H1 2012 results are slightly better than consensus was looking for with underlying profits of $5.2bn beating market expectations of $5.04bn (EPS $2.78 beat market’s $2.73). In terms of outlook, the company has echoed the message from most of its sector peers, highlighting lower commodity prices but remaining convinced in long-term demand (order books full, not seeing hard landing in China). Macro data out of China tomorrow could be a catalyst for the stock, with the nation updating on inflation, producer prices and industrial production. Good data likely taken well, but bad data could also be taken well as it would likely just reinforce calls for monetary stimulus to keep growth of the emerging nation ticking over. In an environment of rising costs, confirmation of its $16bn full-year 2012 CAPEX budget (including recent plans to boost iron ore capacity) may be taken as a negative by those looking for margin preservation. A 34% increase in interim dividend to 72.5c may please income seekers, but the stock remains exposed to macro-economic woes (China, US, Eurozone). After a recent rally of 14%, CFD & Spread Betting traders may now be looking for results to provide a platform for continuation of this trend with a move towards, and potentially above, recent resistance of £33 since May (Central Bank stimulus to help?). Macro-economic woes and risk aversion could see shares ushered back towards May-Aug support around £28.
Currently trading at £31.57, up 0.8%
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This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance. Prepared by Michael van Dulken, Head of Research