- Weaker growth in China spurs speculation of economic stimulus
- Market discounting probability of hard landing: Danske Bank
Metals and mining stocks climbed as shares in China jumped on speculation that the nation will do more to spur its slowing economy, helping to buoy commodities demand.
An index of 18 mining equities tracked by Bloomberg Intelligence advanced 1.4 percent, led by Aluminum Corp. of China Ltd. and Glencore Plc. In London, BHP Billiton Ltd. and Rio Tinto Group also rallied. While China’s economic growth figures released Tuesday missed economists’ estimates, they were still in line with government targets.
Commodity markets have tumbled in 2016 on concern that the economy was heading for a hard landing in China, the world’s biggest consumer of metals, grains and energy. Tuesday’s data helped to calm those concerns, while at the same time, the figures were weak enough to stoke speculation that the government will do more to shore up growth.
“The numbers suggest that maybe all the negativity that’s been priced in the market was a little bit overblown,” Tim Evans, the chief market strategist at Long Leaf Trading Group Inc. in Chicago, said in a telephone interview. “Some of that fear is being pulled out of the market.”
Copper for delivery in three months gained 0.7 percent to settle at $4,408 a metric ton ($2 a pound) at 5:51 p.m. on the London Metal Exchange. Prices climbed 1.1 percent on Monday and had the biggest two-day advance since Dec. 21. On the Comex in New York, copper futures for March delivery rose 1.7 percent to $1.9775 a pound. Trading was shut in New York Monday because of a public holiday.
Nickel was unchanged in London. A deficit will expand sixfold this year amid output cuts in China, said Hiroshi Sueta, general manager in the nickel sales and raw materials department at Sumitomo Metal Mining Co. said Monday. Zinc, lead, and aluminum gained on the LME while tin declined.
“Chinese figures look better than the market feared, which has led the market to discount the probability of a hard landing,” Jens Pedersen, an analyst at Danske Bank A/S in Copenhagen, said by e-mail. “This has lent support to overall risk sentiment in financial markets and helped base-metal prices higher. That said, the market may not be done worrying about China yet, so I don’t expect the price move to continue.”