Miners are expected to lead the ASX higher on Monday morning after iron ore jumped to a 2½-year high and investors in London and New York jumped into BHP Billiton and Rio Tinto.
Record closing highs in the Dow, S&P; 500 and Nasdaq over the weekend also are helping position local shares for a positive start to a hectic week of company profit reports, including the likes of Commonwealth Bank of Australia, Wesfarmers and Telstra.
Futures were pointing to a 0.2 per cent start for the benchmark S&P;/ASX 200 Index on Monday morning. Profit numbers from Amcor, Ansell, Aurizon Holdings, Bendigo & Adelaide Bank, Cover-More Group, JB Hi-Fi and Newcrest Mining will drive trade through the session.
In London, Rio's 5.8 per cent advance helped push the FTSE 100 higher, while BHP added 2.4 per cent. In New York, Rio added 5.3 per cent and BHP was 2.2 per cent higher.
Iron ore futures in China surged more than 8 per cent at one point on Friday, topping the $US100 a tonne mark, in defiance of fears that commodity prices would stumble in the wake of Chinese New Year holidays. The spot price of the steel-making material jumped 3.3 per cent to $US86.62 a tonne, the highest since September 2014.
Friday's much stronger-than-expected Chinese trade data underpinned the renewed appetite for natural resources. Imports rose at the fastest pace in four years amid a continued construction boom, according to preliminary Chinese customs statistics. Meanwhile, indicators suggest global manufacturing activity has begun 2017 on a solid footing. Tuesday's inflation data from the Asian powerhouse is the next key indicator.
Copper also surged over the weekend as BHP told customers to expect disruptions in shipments from its Escondida mine in Chile. Unionised workers began a strike there late last week and indications are the two sides are far apart.
BHP also got a bit of a boost from oil, which lifted on news that OPEC members are complying with new production targets, at a rate of 90 per cent. While Saudi Arabia has been cutting more than it agreed, the initial numbers bode well for efforts to check the global glut.
Analysts are growing more confident that there is still room to tap into the resource-fuelled rally.
Morgan Stanley says yes. It remains "overweight" the sector with specific recommendations for Rio, BHP and South32. Morgan Stanley isn't alone. Credit Suisse rates Rio as "outperform" and raised its target price for the miner's stock to $72, which equates to a more than 9 per cent lift from Friday's $65.95 close. UBS has a "buy" on Rio with a $75 target.
