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Why Atlas Iron Limited shares rocketed 22% higher today

One of the biggest movers on the market on Tuesday has been the Atlas Iron Limited (ASX: AGO) share price.

The iron ore miner’s shares have started 2018 with a bang and are up a sizeable 22.5% to 3.8 cents in afternoon trade following the release of positive economic data out of China.

According to data released by IHS Markit, manufacturing in China rose to its highest level since August during December. While manufacturing does not of course involve iron ore, the data is often regarded as an indicator of the health of the Chinese economy.

With manufacturing remaining strong, the bullish forecasts that many economists have made for economic growth and commodity prices in 2018 appear likely to be reasonably accurate.

It isn’t just Atlas Iron climbing higher today. Fellow miners BHP Billiton Limited (ASX: BHP), Rio Tinto Limited (ASX: RIO), Fortescue Metals Group Limited (ASX: FMG), and Kogi Iron Ltd (ASX: KFE) are all notably higher despite the market sinking into the red.

Should you invest?

Whilst I am fairly bullish on iron ore in 2018, I think investors would be better off investing in miners with more diverse production.

My pick in the sector remains BHP Billiton. Although its shares have rallied strongly over the last few months, I still believe its shares can beat the market this year.

Furthermore, with profits and free cash flow likely to grow strongly, its shares could potentially provide a dividend that is even better than the one on offer with Telstra Corporation Ltd (ASX: TLS).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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