AstraZeneca’s Mystic drug trial failure and 15% share price drop (biggest ever fall) has understandably hogged this week’s headlines. And this means that the performance of a key sector – a retail investor favourite – has slipped under the radar, despite rather impressive gains of 3-12%, easily outperforming the UK 100 index of blue-chips which looks set to close -0.75% with 60% of constituents in the red.

The sector in question is not the much-loved Banks. Although they did offer plenty of excitement with Q2 results this week. Can you believe it, more PPI for both Lloyds and Barclays? Nor is it Oil Majors BP and Shell which were held back by the double-edged sword of a weaker US dollar. This helped oil prices higher, but also resulted in a stronger UK Sterling which reducing the value and attractiveness of its dollar dividends for income-seekers.

The sector I want to talk about is in fact a darling of both long-term investors and punters alike. One which was crucified for five years straight from 2011-16, losing up to 90% on global growth fears, before delivering a monumental turnaround and 200% rally in just over twelve months – a rollercoaster to say the least.

If you haven’t already guessed, it’s the Miners. And top of the pile this week was Anglo American/AAL, +12%, after its H1 results beat expectations thanks to surge in commodity prices such as coal, iron ore and copper. Even more importantly, however, is the reinstatement of its dividend, a whole six months ahead of schedule, after a 2yr hiatus to preserve cash due to the sector crash. Shareholders have understandably jumped on the company’s vote of confidence in the outlook for global growth and thus demand for commodities. Especially with Anglo being the last of the majors to resume payments to shareholders.

Peers may not have rallied as strongly as Anglo, but they have still posted very respectable gains; Antofagasta/ANTO +4.4%, Glencore/GLEN +4.3%, BHP Billiton/BLT +3.5% and Rio Tinto/RIO +3.1%. Some of this is thanks to Anglo’s good news and share price rally (a rising tide…). However, some is also due to one thing they all have in common. They are miners of Copper, a commodity considered a barometer of global growth due to its widespread use in day-to-day products and whose price has jumped an exciting 6.5% in less than a week, to hit fresh two year highs.

Some of the red metal’s 16% rebound since May’s 2017 lows can be attributed to to a more positive view on China (biggest Copper consumer) thanks to positive economic data, IMF upgrades and results this week from earthmoving equipment maker Caterpillar. A weaker USD also helps commodities in general, as does the rolling threat of mine strikes restricting supply. However, this week’s surge comes from especially from talk of China banning imports of scrap metal by the end of next year, which would boost demand for the refined form of the metal and thus increase prices and thus profits.

Now many will quite rightly point out that the above-mentioned shares have all rallied rather handsomely from their sector crash lows. Somewhere between 125% and 472%, of which 20-30% since this May/June. But remember that this was off a very low base, following extremely steep declines of 70-90% in two years.

Assuming they can maintain their steady recoveries, amid an improving growth environment, what’s to say they can’t continue to make up the ground they lost from late 2010/early 2011. After all, AAL is still -64% from its pre-crash highs, BHP -49%, ANTO -43%, Glen -40% (from mid-May IPO highs) and RIO -25%. This means potential upside of 32-180%. They’ve done it once. They could do it again.

The above analysis is typical of what you can expect from Accendo Markets research team. When coupled with helpful charts, well-timed observations and our team of friendly traders, it’s easy to understand why our clients appreciate our award-winning research (get access here) and why they have voted us best CFD Provider for the last eight years. Join them and stay fully informed of the news and views that are important to you. Sample the difference and take your trading to the next level.

As always, have a great weekend.

Mike van Dulken, Head of Research, 28 Jul 2017