Market snapshot: commodity supercycle puts miners in focus
FTSE 100 miners are extending gains as optimism about a global economic recovery spreads.
16th February 2021 08:38
by Richard Hunter from interactive investor
FTSE 100 miners are extending gains as optimism about a global economic recovery spreads.
The UK market is showing signs of getting its mojo back, underpinned by strengthening anticipation on the vaccine rollout and a route to economic recovery.
With markets closed in the US, China and Hong Kong, investor attention turned elsewhere and the UK was a particular beneficiary, rising by over 2.5%, and consolidated with a further gain in early trade today.
Buying interest is also being underpinned by strength in oil and commodity prices, important sector constituents of the FTSE 100. The oil price, now ahead by 22% in the year to date, saw another strong session as a deep freeze in parts of the US both boosted demand, and also potentially threatened supply in the major production area of Texas.
Meanwhile, increasing talk of a commodity supercycle benefited BHP Group (LSE:BHP), where underlying profit rose by 16% to over $6 billion, leaving the shares up by 5% on the day and 16% in the year so far. The surge in the price of copper and iron ore is playing into the hands of the miners, with a late 2020 surge in iron ore arising from heavy buying from China for steel production ahead of its largely anticipated economic bounce back.
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Investors are also slowly turning their attention to the possibility of inflation, fuelled by the various fiscal and monetary stimulus plans in force, although for the moment this is a story for tomorrow. If it were to become an issue later in the year, interest rates may need to rise faster than expected. In the meantime, however, general conditions remain on the side of equities as the investment destination of choice.
The FTSE 100 is now up by just over 5% in the year to date, with hopes of an early recovery also extending to the beleaguered travel and leisure sectors, even though tourism could be limited in the early stages of eased restrictions to another round of staycations.
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