Resources Stocks Weather Global Market Storm
By Charlotte Mathews
22 Mar 2007 at 10:52 AM GMT-04:00
resourceinvestor.com
JOHANNESBURG (Business Day) -- Strong commodities prices defied the plunge in equity prices across global markets last week, showing that commodities are no longer closely tracking the fortunes of the U.S. economy, say market commentators.
Equities prices were shaken by a series of negative economic data from the U.S., showing that the housing market was under pressure, inflation was rising and consumer confidence was falling. According to Imara SP Reid, the Dow Jones index shed 1.35% last week and the S&P500 fell 1.13%.
But all base metals prices, except for zinc, strengthened.
One of the supportive factors for commodities prices, according to Imara, was the weakness in the dollar, which made metals priced in the U.S. currency more attractive.
On the JSE on Tuesday, base metals producers continued to show gains, with copper miner Palabora Mining [JSE:PAM] up 0.38% to R52.50, BHP Billiton [JSE:BHP] 0.71% firmer at R154.10, coal and base metals producer Exxaro Resources [JSE:EXX] 2.56% higher at R58.50 and Merafe Resources [JSE:MRV], a ferrochrome producer, gaining 0.87% to 114 cents.
Numis Securities analyst John Meyer said in a note to clients although U.S. consumption of base metals continued to be significant and would be influenced by trends in the U.S. economy, base metals were being supported by expectations that economic growth in China and Japan would continue to be strong.
The forecast for Chinese gross domestic product (GDP) growth this year remained above 8%, while Japan’s GDP growth of 5.5% in the fourth quarter of last year could indicate that the Japanese economy had “turned the long-awaited corner.”
Numis continued to recommend shares such as Xstrata [LSE:XTA], BHP Billiton NYSE:BHP], First Quantum [TSX:FM] and Antofagasta [LSE:ANTO], Meyer said.
Independent metals consultancy GFMS said in its latest newsletter that fundamental factors supported commodities prices. Despite high prices, inventories monitored by the London Metals Exchange (LME) remained tight.
Latest data from China showed that copper imports had surged to their highest levels for three years and Chinese imports of nickel in all forms were rising sharply, which was likely to continue as the country continued to expand its stainless steel melting capacity, GFMS said.
GFMS said the weakness in the U.S. economy was confined mainly to the residential housing sector, which was affecting aluminium and copper markets in particular. But in Europe, a strong German economy was continuing to drive demand for metals.
Man Metals said in its market report last Friday that the main driver of metals prices last week was technical, or chart-based, buying rather than sound fundamentals, and it warned that the inevitable correction in prices would be “nasty.” |
