What: Australia investors have awoken this morning to news that the iron ore price surged a staggering 18.5% overnight thanks to an upbeat assessment by the market that a pro-growth stance by Beijing would boost demand for steel.
Iron ore is now fetching around US$64 a tonne, representing a rise of close to 70% from the record low of US$38.30 a tonne reached in December 2015.
Oil markets also continue to enjoy positive momentum. Overnight the price broke through the US$40 a barrel level which means it has now climbed around 50% from the 12-year lows hit in January.
So What: Leading the charge higher on Monday amongst the iron ore majors was Fortescue Metals Group Limited (ASX: FMG) whose share price rallied 24%. Peers BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) recorded gains of 7.5% and 5.1% respectively.
Oil producers also enjoyed gains on Monday with second-tier producer Beach Energy Ltd (ASX: BPT) jumping 13%. Amongst the majors Santos Ltd (ASX: STO) was the best performer, increasing by 7.3%.
Now What: While it can be said that markets have a tendency to take the elevator down but the escalator up, when a market is near a bottom there is often a swift move higher.
It can be frustrating to miss those initial gains, however, if the fundamentals have improved – if Chinese policies can really underpin the steel market and major oil producing countries can agree to reign in supply – then we could be looking at the beginnings of a new bull market…
And a new bull market in iron ore and oil – after what has been a harrowing bear market – would imply there are further share price gains ahead.