Record High for US Equity Markets

Equities soar, and some respite for metals, at last, as markets ignore the tariff spat.

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Stock markets in the US have risen to a new record high, with the S&P 500 reaching 2,937 on Friday driven by an inflow last week of US$14.5 billion into US equity funds. This was the largest weekly inflow for six months as investors shrugged off trade tension and rising interest rates.

Despite the US announcing a 10% tariff on US$200 billion of Chinese imports, and China retaliating with plans for tariffs on US$60 billion of American products, equity and metals markets alike were relieved that the tariffs were at the lower end of expectations.

Since June, the major metals have been hammered by the escalating trade war between the world's two largest economies. Relatively robust fundamentals have been ignored, with traders placing largely bearish bets on industrial metals. The sell-off in the past three months saw copper fall by over 15%.

As the third quarter comes to an end, however, commodity markets have recovered their poise. This more bullish outlook has been led by oil, with Brent crude approaching US$80/bbl, which is close to its highest level for four years.

Last week was also a good one for metals, with copper and zinc being particular beneficiaries, up 5.3% and 5.2%, respectively, at US$6,307/t and 2,469/t. Both metals were boosted by signs of robust demand in China, and the premium paid by Chinese buyers of copper is at a three-year high as importers scramble to secure supplies of the red metal.

Nickel rose 4.2% last week to US$13,085/t, and aluminium closed on Friday 0.7% higher than a week earlier at US$2,074/t. However, iron ore (62% Fe) drifted 0.6% lower to US$69.2/t, and gold continued to disappoint, down 0.1% over the week at US$1,208/oz.

Like most major metals, the emerging markets have also enjoyed some respite. Aided by a weaker dollar, the MSCI Emerging Markets index rose 1.5% for the week to end-Wednesday. Nevertheless, investors still withdrew almost US$1.0 billion from globally-focused emerging market funds last week, which is the sixth consecutive week of outflows according to EPFR Global.

There was even better news from South Africa, with Cyril Ramaphosa launching an initiative to revive investor confidence in the recession-hit country. The South African president announced that his administration would repeal regulations on mining (and tourism), and the cabinet approved a new charter for the mining industry. Mr Ramaphosa claimed that the measures would "unlock greater investment in growth sectors". The measures are much needed — the economy fell into its first recession since 2009 in the first half of this year, and unemployment is at a 15-year high of 27%.


Chris Hinde

Chief Commentator, Mining Beacon

Previously editorial director of Mining Journal, and more recently head of S&P Global Market Intelligence's metals and mining team, Chris is now Mining Beacon's editor-in-chief and lead commentator. He posts two blogs every week, one on Monday reviewing market conditions over the prior week, and a second on Thursday looking at issues on the global mining scene. There is also a quarterly blog on business opportunities in the sector.