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Weir Group shares are among the winners this morning as investors help maintain their recovery trend to post fresh 2016 highs (8-month highs in fact). The recent bounce from Feb rising lows support comes thanks to oil prices looking gung-ho to build upon recent gains and conquer the $50 mark decisively (Brent is already there; US Crude is following closely). Oil price optimism stems from last week’s OPEC meeting after Saudi Arabia – via new oil minister al-Falih – took a less aggressively stubborn stance on his nation’s strategy for output and market share retention with more meaningful discussion being had.
A more dovish message from Fed Chair Janet Yellen last night (backtrack; June effectively off the table; Brexit and China are risks) is also helping keep the US dollar index in check around the lows of Friday to the benefit of the dollar-denominated commodities space. Weir’s exposure to the commodity sector via its engineering services for the Mining, Oil & Gas and Power markets sees it benefit from anything that helps raw material prices rally. Whether that comes from the perception of economic recovery, a rebalancing of sector fundamentals and/or loose monetary policy for longer is by-the-by although a combination of all three is a real boon.
Mike van Dulken, Head of Research, 7 Jun
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
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