Recent stock market recovery is bullish for metal prices, say analysts

Stock markets across the globe are finally showing some signs of stabilization after a prolonged hiatus of almost two years which saw investors struggling to make money off the stocks. Though a sharp fall was recorded all over following Brexit, but the sell-off did not persist for long.

The recovery was fast and investors turned all the more positive about global economy.

 

Analysts at Metal Miner took a cue from the above chart, where the S&P 500 index can be seen touching an all-time high this week. According to them, an uptrend in stock markets doesn't necessarily indicate at rising commodity and metal prices, but then it is definitely a good sign.

When there's a decline in the stock markets it indicates at the fact that investors are fearing about overall economic performance, as a result of which they tend to withdraw money from risky assets such as stocks and commodities and put their money in safe-haven assets. Moreover, it signifies slower economic growth which results in slowing down of demand for commodities and industrial metals.

According to the Metal Miner analysts, China's stock market symbolizes the best benchmark for Chinese economy; rather, it reflects investors’ sentiment about the Chinese economy in the best possible way.

China’s stock market nose-dived earlier this year thanks to China’s stimulus measures that fuelled demand growth. The downturn coincided with the slowdown in metal markets. Over the past few weeks, Chinese shares have risen to their six-month highest levels as investors seem to be expecting its central bank to ease monetary policy again.

There might be counter views that these rallies in stock markets are speculative and growth is slowing down. However, analysts opine, when it comes to managing commodity price risk, the market has the last word. "The recent recovery in global stock markets favours a continuation of this year metals’ bull market," they say.

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