Metals Jump on Economic Optimism as Rand Strengthens With Miners
Lukanyo Mnyanda
LukanyoMnyanda
James Regan
October 25, 2016 — 1:12 AM CEST Updated on October 25, 2016 — 1:16 PM CEST
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Metals are regaining their luster, a sign the global economy is becoming more resilient, helping to boost stocks and currencies of commodity-producing nations.
Iron ore surged by the daily limit of 6 percent on the Dalian Commodity Exchange and rising steel prices in China spurred a rally from aluminum to zinc. Currencies of resource-exporting nations, South Africa and Australia, led gains versus the dollar. The Stoxx Europe 600 Index headed for its strongest close in three weeks as earnings reports fueled optimism about the profitability of the region’s companies. Austrian and U.K. government bonds were weighed down by new supply.
Industrial metals have gained steadily this year with an index of London Metal Exchange contracts poised for the first annual increase since 2012 as a pickup in manufacturing in the U.S. and euro area point to an economy that’s getting more robust. A report Tuesday showing German business sentiment rose to the highest level in more than two years in October added to the sense of optimism. Caterpillar Inc. is among companies scheduled to release earnings that may provide more insight on the sustainability of the recovery in energy and mining. Apple Inc. is due to announce earnings after markets close Tuesday.
“We’ve had a whole host of better-than-expected manufacturing data,” said Ole Hansen, the head of commodity strategy at Saxo Bank A/S in Hellerup, a Copenhagen suburb. “Strong gains in China, led by steel and iron ore, are supporting the sentiment, which in turn has attracted increased speculative trading across the metals space.”
Commodities
After three years of slumping prices as mine supply rose and Chinese growth slowed, iron ore has gained 36 percent in 2016. China steelmakers, which produce half the world’s output, have fired up plants after stronger demand boosted prices and expanded profit margins.
Zinc, used to galvanize steel, jumped 2.5 percent at 7:06 a.m. in New York, after surging to a five-year high on the Shanghai Futures Exchange, while hot rolled steel coil climbed to levels last seen in April. Coking coal, necessary for steel production, rallied to an all-time high on tight supplies. Aluminum, copper and nickel all gained at least 2 percent on the LME.
Crude oil rose 0.5 percent to $50.76 a barrel in New York, having declined 0.7 percent on Monday after Iraq said it should be exempted from planned production cuts being orchestrated by the Organization of Petroleum Exporting Countries. The head of OPEC is set to visit Baghdad on Tuesday for talks aimed at resolving the matter.
Stocks
The Stoxx 600 rose 0.1 percent, with miners leading gains. Orange SA gained 1.6 percent after posting an increase in quarterly profit.