Mining stock recovery remains distant

China’s economy shows signs of stabilisation though industry views reveal pessimism

China’s economy shows signs of stabilisation though industry views reveal pessimism

Base metal mining and steel shares led resurgent European stock markets on Friday following some reassuring aspects in Eurozone data. The gains, which saw the big four—BHP, Rio, Glencore and Anglo rise 2%-to-3% each—partly reflecting relief.  The industry has been led a merry dance over the last couple of years as deteriorating relations between Washington and Beijing have exacerbated China’s economic slowdown, chilling miners and metal producers’ most important market.

The early part of 2019’s final quarter appeared to show signs of a turn for the better. Chinese data looked set to stabilize, at least on the surface. Readings showing higher than forecast inflation, PMIs, and steady growth so far this year, roughly coincided with a rebound of mining and metal stocks. Bloomberg’s Europe Mining Index has erased a 4% loss that underperformed the FTSE 100 by some 9 percentage points by mid-August to trade around 9% higher over the year-to-date by Friday. That’s now in line with benchmark’s 2019 rise.

Dither and uncertainty continues to characterise prospects for a ‘phase-one’ trade deal, though sentiment has been underpinned by outward progress of talks since a tentative agreement collapsed in May. The tail-off of declines in Chinese indicators together with a calmer trade outlook has even prompted analysts at some banks to upgrade some mineral volume forecasts. For instance, Citigroup now expects a recovery across many mined commodities, except thermal coal, over the next four quarters. That view, as well as a mellower take by investors on trade sees European steel makers ArcelorMittal, Salzgitter and SSAB rise some 2% to 4%.

No one believes the miners and metal makers are in the clear, of course. JPMorgan’s global manufacturing PMI rose in October, though remained below 50, denoting continued broader contraction, despite China’s resilience. Even there, October credit data and a complete standstill of new infrastructure approvals counters improving conditions elsewhere. Little wonder sentiment at the LME’s recent industry event was reportedly ‘unenthusiastic’, particularly about copper, in which demand growth is expected to average below 2% over the next few years. The underlying consensus seems to be that the demand outlook remains too uncertain for markets and producers to fully commit to more optimism.

Sentiment is aptly demonstrated by the normalised chart of FTSE 100 miners below. The best performer in the year to date is Anglo American, standing 18% ahead on Friday. But it had been almost 30% higher in July. EVRAZ, the UK-listed Russian steel and mining firm gained about 50% into the mid-year only to erase the advance and slump to a 25% loss this week. Investors clearly aren’t expecting a demand recovery across metals in the near term.

Normalised: FTSE 100 mining stocks, year to date

Source: Bloomberg/City Index


This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit for the complete Risk Disclosure Statement.