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Rio Tinto shares are among the UK Index winners this morning despite the mining giant downgrading its expectations for iron ore production in 2017 and highlighting a tough Q1 as growth stalled and shipments fell sharply due to operational challenges including weather and exhausted stockpiles. Nonetheless, the positive share price response today comes from reiterated 2016 guidance despite problems with an automated train system, a continued oil price rebound post-Doha helping commodity sentiment in general and dovish Fed commentary pushing the commodity currency US dollar lower. Oh and renewed optimism on China is supportive, adding to the bullish sentiment that is pushing major equity indices higher. Perversely, the supply disruption that held back Q1 production is serving to shore up commodity prices which rebounded strongly in Q1 from depressed lows on hopes that the worst of the global supply glut might be behind us, with a knock on for shore prices. Even management’s comments about continued commodity price volatility are falling on deaf ears with traders now almost immune to the bigger swings we have become accustomed to over the last 12 months.
Mike van Dulken, Head of Research, 19 Apr
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