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3.04.2017

What’s Cooking In Global Mining Stocks?



Global mining stocks have been in a spot over last few weeks, soaring sharply in tune with the broad spurt in equities amid hopes that the infrastructure spending boom as projected by US President Donald Trump, leads to a sharp uptick in demand. However, S&P/TSX Global Mining Index has been showing signs of weariness off late. The index has been in a constant downward spiral after hitting two year highs, following flip-flops in global copper prices.

S&P/TSX Global Mining Index had followed DOWJONES closely in their previous rally (2004-2007) and even managed to outperform the headline index after the global crash of 2008. However, the correlation between the two indices broke down in 2011 and next few years saw the mining counters slide constantly even as DOW managed to gain strength. To put in perspective some figures about the relative performance, if one looks at the returns in these two indices over last ten years, the DOW beats mining counters hands down. DOW has added about 73% in last ten years while the mining index has dropped nearly 31% in the same time. 

A massive jump was witnessed in the index during 2016 with the soaring metals prices boosting sentiments sharply. The index nearly doubled between Jan 2016-Jan 2017. The S&P/TSX ended at 67.67 on 3RD March 2017, extending a drop from two year high of 73.18, which the index managed to hit in the middle of February 2017. The index has turned lower over last three weeks even as the US stocks kept on hitting a series of record highs. The S&P/TSX Global Mining Index provides investors with a benchmark for global mining portfolios.

Meanwhile, COMEX Copper futures are looking shaky on weekly charts. The metal has been on a strong upward trajectory in last few months as support near $2 per pound managed to hold on for a substantial period of time last year. The counter is attempting to take out its 200 week exponential moving average, currently placed at $2.78 levels.


S&P/TSX Global Mining Index V/S DJIA


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