The Resource sector is one of a few big winners this week, with base metals Miners posting several days of excellent returns. But we’ve seen small jumps for Glencore, Anglo American and Rio Tinto already this year. Could Miners finally turn the page on a miserable year?

Traders who invested part of their portfolio in Mining stocks have been smarting in recent months, as the majority of UK 100 mining shares have delivered negative returns.

In fact, BHP Billiton is the only UK 100 miner that is net positive this year thanks to its diversification into the oil & gas sphere (and having exposure to energy is a big boon with Brent crude pushing close to $80/barrel mark), though even with the big Australian conglomerate, the +0.7% YTD returns are nothing to write home about. BHP Billiton is also the only mining blue-chip that has seen a big recovery from this year’s summer sell-off, having bounced over 12% from 2018 lows.

The rest of the Miners have more or less been trading near 2018 lows, plumbing new depths with each new announcement of a worsening in the US-China trade confrontation.

So, has this week’s latest bounce been more of the same? We’ve seen these momentary upticks in Anglo American, Glencore and others multiple times this year, but every time those shares reversed back into the downtrend after a few days.

What makes me optimistic this time is that the hope of a new détente between US and China is at a much higher level. Last time Beijing and Washington discussed diffusing tensions, it was at a level of low-to-mid-tier functionaries. This time, The Wall Street Journal reported that US Treasury Secretary Mnuchin himself is leading a delegation to Beijing to discuss trade and tariffs. You don’t send a high-level cabinet member just for a bit of jaw-jaw, hence why markets are much more bullish on China-sensitive Miners.

And with trade sanctions starting to take a real bite out of China’s economy (latest Fixed Asset Investment figures reported new record lows), the hope is that Beijing will also be more receptive to a negotiated solution and would accept a compromise that would satisfy the White House’s protectionist occupant.

Highly unpredictable vagaries of Donald Trump himself may yet play a spoiler, as they usually do, but with adults finally in the room (ex-Goldman banker Mnuchin certainly qualifies) there is hope this time that the global trade confrontation may be transitioning into its final third act.

Retail investors would certainly welcome a bit of peace and quiet in global trade. It would certainly give them time to dig deeper and unearth the buried potential in Mining stocks.

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Avin Nirula, Trader, 14 September 2018