What a difference a few days can make. While the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) gained 0.62% on Monday, iron ore miners managed to rally between 3.5% and 7% with Arrium Ltd (ASX: ARI), Atlas Iron Limited (ASX: AGO), BC Iron Limited (ASX: BCI), Fortescue Metals Group Limited (ASX: FMG) and Mount Gibson Iron Limited (ASX: MGX) dominating the list of biggest movers within the index.
The rally in iron ore stocks appeared to be largely thanks to a strong purchasing manager's index (PMI) reading out of China. According to a report in the Australian Financial Review, the HSBC/Markit Flash PMI registered its first expansion (a reading above 50) this calendar year.
The PMI reading would be good news for the iron ore trade if it is accurately predicting a pick-up in Chinese manufacturing activity, however ultimately iron ore producers will require sustained construction activity in China as this accounts for the bulk of iron ore demand.
The other factor playing in favour of producers was an uptick in the iron ore price which last week fell below US$90 per tonne. Monday saw the price cross back above the US$90 mark.