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Iron Ore Rallies After China's Premier Says No Hard Landing -- Barron's Blog

27 Jun 2017 8:11 am

By Robert Guy

Iron prices surged on Tuesday after Chinese premier Li Keqiang told the World Economic Forum in Dalian there would be no hard landing in the world's second largest economy.

Iron ore prices in Dalian rose more than 3% on Tuesday, with Australian producer Foretscue Metals Group ( FMG.AU) rallying 3.8%. Rio Tinto ( RIO.AU) advanced 0.5% and BHP Billiton ( BHP.AU) rose modestly.

Premier Li said China would achieve its growth target of about 6.5% this year. The economy grew at a 6.9% pace in the first quarter. Reuters has the details on what Li said on the outlook for growth:

"China's economy in the second-quarter maintained the first-quarter's steady and improving momentum. We are fully capable of achieving the main economic targets for the full year," Li said.

"Currently, China also faces many difficulties and challenges, but we are fully prepared," he said.

Li also addressed concerns about China's financial system and its exposure to non-performing loans. Beijing has moved to tighten credit over the past couple of months to help rein in leverage, with market based interest rates moving quickly higher. Here's Reuters with what Li said about financial risks:

"There are indeed some risks in the financial sector, but we are able to uphold the bottom line of no systemic risks," he said.

"We are fully capable of preventing various risks and making sure economic operations will be within a reasonable range."

The bounce in iron ore prices comes after the steel making ingredient has steadily declined from its highs around $95 a tonne in February. prices have been weighed down by concerns about high stockpiles at Chinese ports and the ramp up of supply from new mines such as Hancock Prospecting's Roy Hill.

James Gerrish, a senior adviser with Australian brokerage Shaw and Partners, reckons there are opportunities in resources stocks:

We're starting to see some interesting trends bubble away in terms of commodities, ahead of what's a typically strong period for our miners. In early 2016 commodities started a strong bull run as optimism around global growth picked up, Trump won the election and that pushed commodity stocks up into a January 2017 high. Since then, commodity stocks have been under pressure around the globe and the Australian miners have felt the brunt of it, however this period of consolidation / weakness now look done and opportunities are popping up.

According to a number of different measures, commodities are now cheap, in fact they are the cheapest they have been relative to the S&P 500 in history.
 More at Barron's Asia Stocks to Watch blog, http://www.barrons.com/asia-stocks-to-watch 

(END) Dow Jones Newswires

June 27, 2017 04:11 ET (08:11 GMT)

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