Thank a gloomier-than-expected U.S. economic outlook for the biggest rebound in mining stocks since the global financial crisis. Pummeled in the past year amid faltering Chinese demand and the prospect of higher interest rates, mining stocks are now surging the most in seven years. Freeport-McMoran Inc. and Anglo American Plc paced gains among major producers, with the Bloomberg World Mining Index’s combined market value swelling by $44 billion in the past two days.
Behind the rally is a sliding dollar amid speculation that global growth may not be strong enough to warrant further central-bank tightening. That makes commodities cheaper in other currencies, boosts the appeal of haven investments such as gold and signals lower credit costs for producers.
“We may not see a rally from these levels, but we’re not going to fall much further,” Andy Pfaff, the chief investment officer for commodities at MitonOptimal Group, said by phone from Cape Town, after moving from a short to a long allocation in copper. “Production cuts are starting to get noticed across the complex. “I think the lows are in.”
[Source: Bloomberg Business - Luzi-Ann Javier & Thomas Biesheuvel - February 4, 2016]
