Miners Benefit from Commodity Rally

Posted on | October 14, 2009 |

London’s leading index continues to find form in the afternoon session, with the FTSE 100 currently sitting at 5241.45 at 3.15pm (London time).

Miners continue to set the pace with Rio Tinto and BHP Billiton both up on the day. Rio Tinto’s share price benefited as third-quarter iron ore production rose to a record level, due to demand from steelmakers in China.

Rio has so far gained 4.55%, with the share price at 2977.50p. While a decline in Chinese exports helped BHP Billiton Ltd, as copper led a rally in metal prices. The world’s largest mining firm managed a gain of 4.2% to 1838.50p.

Oil continues its five-day rally and has set a high for the year of $75 a barrel. The recent drive we have seen for commodities over the past week has a lot to do with the weakening Dollar.

Gold benefited last week, and now it is the turn of oil. However, analysts have been quick to point out that any rally could be easily halted if the Dollar finds strength.

Over in the US, we have seen a mixed bag in terms of data releases. The US Commerce Department announced that retail sales have fallen by the largest amount in 2009, driven by a fall in car sales and the end of the country’s car scrappage scheme.

However, this was less than analyst expectations, with retail sales falling by 1.5%, less than the expected 2.1%, indicating that the economy is still recovering.

Banking giant JP Morgan beat forecasted profits for the period between July and September by posting a net income of $3.6 billion, compared with $527 million for the same period last year.

The bank had benefited from the impact of buying most of the assets of Washington Mutual. The strong performance by JP Morgan helped the bank to add $1.31 to its share price, bringing it to $46.97.

This positive sentiment also helped the Dow Jones to open strongly. By 4.00pm (London time), the Dow Jones Industrial Average was trading 105.65 points (+1.07%) higher at 9976.71, the broader S&P 500 was also up 12.24 points (+1.14%). The Nasdaq was also in positive territory, up 23.12 points (+1.08%) to 2163.01.

It will be interesting to see what Goldman Sachs, Bank of America and Citigroup post when they announce their third-quarter profits later in the week.

Tomorrow in the UK look out for the full-year results from WH Smith, while over the pond expect investors to be watching out for the Fed’s Empire State manufacturing survey, as well as third-quarter earnings from technology giant Google.

By Anthony Grech, Research Analyst, IG Index.

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