Biden infrastructure plans could see miners surge once more

Miners have been easing back on fears that China would withdraw stimulus, yet a planned $3 trillion infrastructure plan from Biden highlights a potential resurgence for the sector

Commodities pause, but could resume from here

2020 was a positive one for commodity prices, with Chinese industrial expansion helping to make up for economic weakness around the globe. Even ‘Dr Copper’ has managed to see a huge expansion despite the clear lack of growth evident over the course of 2020.

Nevertheless, while services were hit hard, manufacturing has managed to get back into a more positive position thanks to financial support on the government level. So much so that the German manufacturing sector just posted a record 66.6 manufacturing purchasing managers index (PMI) reading.

Nevertheless, while 2020 industrial strength helped drive upside for commodity prices, we have seen significant questions arise since as traders consider a potential withdrawal of stimulus from the likes of China.

Biden plans highlight commodity super-cycle claims

Recent claims that we are on the cusp of a commodity super-cycle are driven by huge green infrastructure plans throughout the Western world.

That will be brought into the limelight once again in the coming week as US President Joe Biden lays out plans for a whopping $3 trillion infrastructure bill.

Whether that gains approval or not remains to be seen, but it does highlight the huge amount of raw materials that will be required as countries spend big in the name of energy transition.

While some believe China could ease back a little on their expansion, it seems likely that their insatiable desire for growth will continue to necessitate substantial imports of key commodities.

Meanwhile, major infrastructure plans in the Western world add further fuel to that fine.

Bullish momentum could be growing for FTSE miners

The relative rotation graph is a key tool for traders seeking to understand which stocks could come into and out of fashion at any given period of time.

Interestingly, we can see that miners BHP Group, Rio Tinto, Anglo American, and Glencore are all reversing up towards the ‘improving section.

That highlights the potential for future outperformance for the sector, tying up with the increased focus on infrastructure spending growth in the US. As such, keep an eye out for future strength in the mining sector following a period of consolidation.

Pullback brings potential buying opportunity

The chart below highlights the performance of the likes of Anglo American, BHP Group, Rio Tinto, and Glencore against the price of copper and iron ore.

All those markets retain a trend of higher highs and higher lows despite recent losses. As such, the current pullback looks to be a retracement within a uptrend.

As such, until we see a break below the prior swing-low, the current pullback is expected to mark a strong buying opportunity for mining stocks.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Trade on commodities

Trade commodity futures, as well as 27 commodity markets with no fixed expiries.1

  • Wide range of popular and niche metals, energies and softs
  • Spreads from 0.3 pts on Spot Gold, 2 pts on Spot Silver and 2.8 pts on Oil
  • View continuous charting, backdated for up to five years

1In the case of all DFBs, there is a fixed expiry at some point in the future.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.