Iron ore miners gain as analysts mull China stimulus impacts
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The news: Iron ore miners advanced on the ASX despite uncertainty over China's next move to boost its economy.
The numbers: Iron ore majors Fortescue (4.06%), Champion Iron (3.43%), Rio Tinto (1.97%), and BHP (1.82%) were all trading higher by 2:34pm AEDT.
Materials, up 1.29%, was the best performing sector as the wider market gained 0.47%.
Singapore iron ore future were up 1.83% to USD108.15 ($160.4) by afternoon trade.
The context: Citi analysts said they see "overall headwinds" for base metals prices in the fourth quarter of 2024, driven by potential new tariffs by US presidential candidate Donald Trump, weak European growth, slowing US activity, Middle East tensions and soft global manufacturing activity.
However, they noted they are "tactically bullish" on copper, iron ore and base metals over the next two weeks on expectations of further policy stimulus announcements in China. Citi's China economists expect further China policy easing with fiscal measures likely to be announced by the end of the month.
ANZ analysts noted that while officials in China have repeatedly said they will support the country's real estate market, there is little available detail of any additional measures they will be implementing.
However, Chinese steel rebar prices have continued to lift, the analysts said, suggesting the recent weak conditions are easing.
The analysts also flagged that the move by China's central bank to support equity markets could "ultimately be beneficial to commodity markets".
What they said: "A combination of stability in the real estate sector and stronger equity markets could see consumer sentiment rebound, which could bolster domestic confidence enough to lead to an economic rebound and stronger demand for commodities," ANZ analysts said.
"More importantly, it may enable China to continue to execute the measures it has already announced.
"... An improvement in manufacturing should also help offset ongoing demand weakness in the property sector for steel and iron ore."
The sources: Citi research, ANZ research
