Trade truce lights fire under mining stocks

Relief that an escalation in the trade war between the US and China has been avoided – at least for now – sparked a huge rally in mining stocks on Monday.

Gold closed at a one-month high just shy of $1,240 an ounce, iron ore continued to climb from recent lows above $66 a tonne and while the rally in the price of copper had fizzled out by afternoon trading, it did not stop investors from piling into the sector’s big names.

BHP added 4.8% lifting the market valuation of world’s largest mining company by revenue to $122B in New York. Number one and two iron ore miners Vale and Rio Tinto’s gains were more modest at 2.8% and 2.3%.

Shares in world number four miner Glencore were lifted 3% despite the Swiss firm revising down expected earnings at its trading arm after buyers of cobalt from its mines in the Congo reneged on deals amid a fall in the price of the battery raw material.

Among large diversified mining companies Anglo American was the best performer, jumping 6.3% after palladium futures settled a fresh record high of $1,165 an ounce.

Top nickel and palladium producer Norilsk added 2%, lifting the company’s market value to above $30B for the first time since early March.

Canadian copper miner First Quantum Minerals was the day’s top large mining stock surging 11.4%. Fellow Canadian miner Lundin Mining also enjoyed double digit gains while Ivanhoe Mines advancing PGM and copper projects in south and central Africa added 9.7%.

While the mood on mining markets have lifted recently 2018 is likely to be a severe down year for hard commodities.

Of the most traded metals, only palladium is in positive territory so far while zinc and lead is more than 20% cheaper than at the start of the year. Cobalt is down more than 40% from highs hit during the second quarter.

The US imposed an import tariff of 10% on $200B of Chinese goods in September. The rate was scheduled to rise to 25% on January 1. At the G20 meeting over the weekend President Trump and President Xi agreed to a 90-day delay to make time for further negotiations.