Why are BHP shares having such a stellar week?

It's been a good week so far for the Big Australian amid optimism surrounding the iron ore price.

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Key points
  • BHP shares have lifted 3% this week
  • They've outperformed the benchmark ASX 200 since market close on Friday
  • The iron ore price has been rising amid hopes of economic stimulus measures in China

The BHP Group Ltd (ASX: BHP) share price has risen against the ASX 200 this week.

BHP shares have gained 3.4% since market close on 9 June from $44.72 to close at $46.25 on Thursday. For perspective, the S&P/ASX 200 (ASX: XJO) has climbed 0.75% in the same time frame.

Let's take a look at what's been going on with the BHP share price.

Female miner standing smiling in a mine.

Image source: Getty Images

What's happening?

BHP is not the only ASX 200 iron ore share that has lifted since the start of the week. Rio Tinto Ltd (ASX: RIO) shares have gained 2.8% since market close last Friday, while Fortescue Metals Group Ltd (ASX: FMG) shares have jumped 8.1%.

The iron ore price has increased 5% in a week and is now trading at US$114.50 a tonne, Trading Economics data shows.

This improving iron ore sentiment appears to have given BHP a boost on the market this week.

ANZ economist John Bromhead highlighted base metals lifted amid speculation that Chinese officials could be planning economic stimulus measures. In a research note this morning, he said:

Iron ore futures extended recent gains as investors bet on further stimulus measures boosting demand for iron ore and steel.

Sentiment was supported by data from the China Iron & Steel Association that showed steel output at major Chinese mills jumped 6.5% in early June from late May.

However, the gains were limited amid concerns the government's room to manoeuvre may be limited by already stretched local government balance sheets.

The gains over the past two days come after BHP and other ASX 200 iron ore shares had a shaky start to the week. On Tuesday, BHP shares slid 0.96%.

Meanwhile, analysts at Goldman Sachs have retained a buy rating on BHP shares with a $46.90 price target.

Goldman predicts BHP to pay fully franked dividends of US$1.90 a share in FY 2023 and US$1.50 in FY 2024.

Share price snapshot

The BHP share price has risen nearly 5% in the past 12 months.

BHP has a market capitalisation of about $234.29 billion based on the latest share price.

Motley Fool contributor Monica O'Shea has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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