Manufacturing in the U.S. shrank in January for a fourth consecutive month as businesses cut staffing plans. Growth resumed in new orders and production, indicating some stabilization in the industry.

The 48.2 reading for the Institute for Supply Management’s index followed December’s 48 level that was the weakest since June 2009, data from the Tempe, Arizona-based group showed Monday. The results were lower than the 48.4 median forecast in a Bloomberg survey of 79 economists. Levels less than 50 for the gauge indicate contraction.

Factories are buffeted by persistent weakness in the oil industry, the stronger dollar and cooling overseas markets that also limited growth last quarter. The report showed the gauge of new orders, a leading signal for production, grew for the first time in three months, which would help manufacturing to eventually strengthen.

“This may be signaling the start of some stabilization in manufacturing activity and U.S. economic activity,” said Millan Mulraine, deputy head of U.S. research and strategy at TD Securities USA LLC in New York. “It’s good enough to know things haven’t gotten worse. The rise in new orders is encouraging.”

Economists’ estimates in the Bloomberg survey ranged from 47 to 50.5.

The new orders gauge rose to 51.5, the strongest since August, from 48.8. A measure of production climbed to 50.2, the first expansion in three months, from 49.9.

The factory employment index dropped to 45.9, the weakest since June 2009, from the prior month’s 48.

The measure of export orders dropped to a four-month low of 47 last month from 51.

The gauge of factory inventories held at 43.5, while customer stockpiles stayed at 51.5. The index for supplier deliveries was little changed at 50 after 49.8.

The report also showed the index of prices paid were the same as the previous month’s reading of 33.5, which was the lowest since April 2009. The prices measure has been contracting since November 2014.

Eight of 18 industries surveyed by the purchasing managers’ group posted growth, including machinery, computer and electronic products, electrical equipment and furniture.

“I really like the fact that new orders is up,” Bradley Holcomb, chairman of the ISM factory survey, said on a conference call with reporters. That gauge “really drives the system.”

While it’s “too early” to declare the worst is over, the orders numbers bear watching and a sustained pickup “could signal a bottom” for the industry’s slump, Holcomb said. In addition, the index of backlogs “is moving in the right direction” by contracting at a slower pace, also indicating an improving outlook.

http://www.bloomberg.com/news/articles/2016-02-01/manufacturing-in-u-s-contracted-in-january-for-a-fourth-month

January saw the Indian manufacturing sector climb back into expansion territory, as the industry recovered following the contraction seen at the end of last year.

Alongside a resumption of output at some firms impacted by December's flooding, manufacturers also benefited from rising inflows of new business from domestic and export clients.

At 51.1 in January, up from 49.1 in December, the seasonally adjusted Nikkei India Manufacturing Purchasing Managers IndexTM (PMI)TM, a composite single-figure indicator of manufacturing performance, moved back above the 50.0 mark.

Although the rate of expansion was only moderate, it was the sharpest signalled for four months.

http://steelguru.com/steel/indian-manufacturing-sector-returns-to-growth-at-start-of-2016/445175#tag

Ratings agency Standard & Poor's on Tuesday lowered the credit ratings of BHP Billiton Ltd and put it on negative watch, while it placed Rio Tinto on watch negative, both actions due to challenging market conditions for commodities.

The ratings agency cut BHP's debt to A from A-plus and said a further downgrade by one notch will depend on BHP's dividend policy and capital expenditure guidance due out this month.

The move reinforced market speculation the miner will have to lower its payout to shareholders.

S&P also placed rival company Rio Tinto's A-minus ratings on negative watch.

"We could lower the rating by one notch over the coming weeks if the company does not take supportive measures amid the currently weak commodity prices pressuring its cash flows."

Analysts expect Rio to maintain its dividend for now.

Both ratings actions follows S&P's price assumptions for commodities, the agency said.

The price of iron ore, Australia's top export earner, has recently dropped to its lowest in over a decade.

Last month, Moody's placed 175 oil, gas and mining companies on review for a downgrade due to a prolonged rout in global commodities prices that it says could remain depressed for some time.

For some investors sliding commodities can result in debt bargains.

Sanjiv Shah, chief investment officer at London-based Sun Global Investments, singled out BHP's U.S.-denominated subordinated debt due in 2075 paying attractive yields of 7 percent and 7.48 percent.

"The long rout in commodity prices has hit debt and equity securities issued by metal and mining companies, with many securities looking oversold and therefore attractive if commodity prices do not fall significantly from current levels or stabilise at current levels."

BHP Billiton remains one of the highest rated mining companies.

http://www.reuters.com/article/bhp-billiton-ltd-ratings-idUSL3N15G5KD

The decision by Standard and Poor’s to downgrade the debt rating of BHP is a wake-up call first to the Big Australian. It’s time for BHP to come to grips with the fact that the 2016 dividend game is totally different to past years.

BHP will now almost certainly reduce its dividend in the current half year.

Directors of BHP have been petrified that if they lower their dividend their shares will be slashed in the market.

They can take comfort from the experience of Brazilian iron ore miner Vale, which last week announced that, given its problems and the Samarco disaster, it was suspending dividends. The shares responded by rising almost 8 per cent and last night they held most of that gain until a late fall evaporated about half Friday’s rise.

Of course, it’s true that Vale shares have fallen from an annual peak of above $US9 to around the current level of $US2.37.

BHP’s 2015 dividend rate involved a payout of around $US6bn and Citi group estimate that if BHP’s capital expenditure is around the forecast level of $US8bn, then the company will need to borrow $US4bn in 2016 to pay dividends at the 2015 level.

If BHP continues to borrow big in order to pay dividends, in the absence of a jump in commodity prices and if it is not very careful, it will put itself into a downward debt ratings spiral.

http://www.businessspectator.com.au/article/2016/2/2/industries/red-flag-bhp-and-banks-dividends?utm_content=SocialFlow&utm_campaign=EditorialSF&utm_source=BusinessSpectator&utm_medium=Twitter

Beleaguered Anglo American is said to be planning a complete exit from Brazil, where the company has already put its $1 billion niobium and phosphate business up for sale.

First-round bids for those assets are due on Feb. 15, date that — reportslocal newspaper O’Globo (in Portuguese) — may bring some major surprises. According to veteran columnist Angelmo Gois, Anglo is also seeking to sell its Barro Alto nickel mine, as well as the vast Minas-Rio iron ore complex, which came into production last year, just as prices for the steelmaking ingredient spiralled toward historic lows.

Last week, Anglo said it was revising its production strategy for Minas-Rioto ensure lower operating costs, without given further details or mentioning any potential plans to sell the asset.

Other than its $1 billion niobium and phosphate business, already up for grabs, Anglo is said to be mulling the sale of its Barro Alto nickel mine, and the vast Minas-Rio iron ore complex.

The mine had been plagued by delays and cost overruns since Anglo bought it for $5.5 billion in two stages in 2007-2008.

BHP spin-off South32 is said to be among the bidders for Anglo’s niobium and phosphate assets. According to local reports, the mining giant is seeking to complete such sale in one transaction, rather than splitting them.

The assets up for sale are set to make Anglo the world’s second-largest producer of niobium, a material used in high-temperature alloys for jet engines and lightweight steel for cars, when it completes its $325 million Boa Vista Fresh Rock plant, located in Brazil’s Goias state, later this year.

It produced 2,934 metric tons of niobium in the first half of 2015, and the business contributed $35 million to earnings before interest, taxes, depreciation and amortization. The phosphates unit had output of 513,000 tons with Ebitda of $52 million.

The assets sales come as Anglo American undergoes a major restructuring aimed to improve its balance sheet. This strategy has included putting offloading several mines in the last few months, from copper mines in Chile to Australian coal assets and its platinum business in South Africa.

Last month, the company finally completed its exit from the Middle East by selling its Tarmac business to Colas Moyen Orient, a subsidiary of French engineering and construction company Bouygues Group.

Anglo American, which plans to consolidate its business into three units from the current six, will be “a very different company” after it follows through on the restructuring plan, chief executive Mark Cutifani promised in December, as he unveiled the firm’s "radical portfolio restructuring."

Such reorganization includes reducing its total workforce from 135,000 to just 50,000 by 2017.

http://www.mining.com/anglo-american-may-fully-exit-brazil-report/?utm_source=twitterfeed&utm_medium=twitter

Israel, Cyprus and Greece have agreed to deepen their energy, security and tourism ties in the Eastern Mediterranean, a deal that may have implications for Israel's testy relationship with the European Union, too.

The agreement, signed in Nicosia last week by a beaming Prime Minister Benjamin Netanyahu, Greek premier Alexis Tsipras and Cypriot President Nicos Anastasiades, focused on energy and the exploitation of natural gas deposits off Israel and Cyprus.

The Leviathan and Aphrodite fields are unlikely to start exporting before 2019 or 2020. Nevertheless, the ambition is to transport gas by pipeline, possibly via Turkey, or in liquefied form by ship to Europe, plugging the East Mediterranean into Europe's grid and providing an alternative to Russia - which has far worse relations with the EU due to the Ukraine crisis.

With global energy prices expected to remain low for some time, analysts question whether East Mediterranean gas will be the bonanza investors hope, but that didn't prevent the leaders singing the praises of their joint declaration.

"We live in a turbulent, fluid environment," said Netanyahu, emphasizing working together on policies from tourism to water-management would make all three states stronger. "We have an unprecedented opportunity to advance our common goals," he said, adding: "We have been blessed with natural gas."

Israel and the two EU members all have sound commercial, defense and political reasons for closer cooperation.

As well as attracting more visitors and investment, Cyprus and Greece hope some of Israel's high-tech success will rub off on them and lift their economies, both bailed out by the EU and IMF. There's also Israeli know-how in defense, migration, cyber-security and counter-terrorism to draw on.

Israel hopes to sell its expertise in these areas, as well as gaining extra allies in a region where it feels isolated, with Syria at war on its northern border, Lebanon's Hezbollah a threat and ties with the Palestinians as troubled as ever.

Israel has already used the presence of a Russian-made air defense system located in Greece, which was originally supplied to Cyprus and traded to Athens, to train fighter pilots on how to thwart technology now being deployed in Syria.

EU RELATIONS

There is also a more nuanced potential benefit for Netanyahu: more partners inside the EU who may be inclined to defend Israel's interests or at least not lean immediately towards the Palestinians on Middle East issues.

With France issuing an ultimatum to Israel at the weekend - saying it would recognize Palestine as a state if a new peace initiative doesn't succeed - Israel is hoping its new allegiances in the EU will help head off the French threat.

Greece has traditionally been pro-Palestinian and was expected to remain so when Tsipras, a leftist, was elected last year. The same went for Cyprus to an extent. But the Palestinians now regard both as having shifted allegiance.

"The emerging tripartite alliance ... weakens the strong and solid relationship that the Palestinian people have always maintained with Cyprus and Greece," said Hanan Ashrawi, a senior member of the Palestine Liberation Organization.

"As such, this agreement will only embolden Israel to pursue dangerous policies that have serious ramifications on the whole region. We call on Cyprus and Greece ... to maintain the earlier integrity of their support for the Palestinian cause."

http://www.reuters.com/article/israel-mediterranean-ties-idUSL8N15G1WX

Gunvor Group Ltd. is getting out of the metals-trading business and its top trader Rene Van Der Kam has left the firm amid a global slump in commodity prices.

“Profitability was decreasing, while risk was increasing,” Seth Pietras, a Gunvor spokesman in Geneva, said by phone.

All or most of warehousing will be liquidated and the metals management will depart, according to an internal memo obtained by Bloomberg News. A team will be created to unwind positions and execute existing contracts, the company said.

Gunvor’s iron-ore and specialty-ores trading won’t be affected and the Shanghai office will remain in operation as the company expands oil and energy trading in China, the memo said.

Pietras confirmed Van Der Kam’s departure and the contents of the memo. Three other people from the metals desk will also leave the firm. Van Der Kam, who joined Gunvor from Noble Group Ltd. in 2014, declined to comment when reached by telephone.

The pullback from metals mark the latest in a string of high-profile shakeups at the world’s biggest trading firms. While oil traders have generally thrived amid falling prices and high volatility, metals traders have struggled to make money as demand for raw materials from China weakened.

http://www.bloomberg.com/news/articles/2016-02-01/gunvor-pulls-back-from-metals-trading-as-profitability-slumps

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A Brazilian judge sentenced the former head of state-run oil company Petrobras' international division to 12 years and two months in jail for corruption and money laundering on Monday, part of the country's largest-ever graft investigation.

Federal judge Sergio Moro said Jorge Zelada had unduly awarded U.S. company Vantage Drilling a 2009 contract with Petrobras for the drillship Titanium Explorer in exchange for bribes stashed in undeclared accounts in Monaco and Switzerland.

Moro also convicted former Petrobras executive Eduardo Musa and lobbyist Hamylton Padilha, though their sentences were reduced because they signed plea agreements.

Prosecutors said together Zelada and Musa took $31 million in bribes from Padilha and Hsin Chi Su, chief executive of Taiwanese shipping firm TMT, after Padilha and Su, a Vantage shareholder, met at the Four Seasons Hotel in New York to discuss the bribe.

For nearly two years the landmark investigation overseen by Moro has mostly focused on local engineering firms and executives accused of price fixing and overcharging Petrobras for work and then using the extra funds to bribe politicians.

But it has already ensnared some international companies tied to Petrobras. Prosecutors have counted 285 foreign firms that have done business with agents who are under investigation, like Padilha, though they say that does not mean as many firms are being investigated.

Zelada's lawyer Renato de Moraes said he would appeal the decision and seek acquittal. Zelada led the international division for Petroleo Brasileiro SA, as Petrobras is formally known, from 2008 to 2012.

Moro said in his decision that Zelada's defense had called Vantage CEO Paul Bragg as a witness, but said the request was not granted because the cooperation treaty between Brazil and the United States only requires compliance with witness requests when called by the prosecution.

Padilha testified that Bragg did not know about the bribe payment, Moro said.

Vantage said in July, when Zelada was arrested, it was fully meeting the terms of the drillship contract and had found no evidence of improper activity. If Padilha committed any illegal acts he was not representing the company, it said.

A judge in Rio also convicted Zelada earlier this month of fraud on a contract awarded to conglomerate Odebrecht SA and sentenced him to a maximum four years in jail.

http://www.reuters.com/article/brazil-corruption-petrobras-idUSL2N15G1SH

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