The Western Areas Ltd share price just surged 10% higher

With the trade war between the United States and China averted and now being replaced with trade negotiations, global financial markets are pushing higher once again.

One area of the market in particular that has been given a lift is the resources sector. Fears of a trade war had weighed heavily on commodity prices and the shares of the companies that mine them amid concerns that global growth could have been negatively impacted.

So with the crisis averted, it will come as little surprise to see resources shares pushing notably higher today.

This includes the likes of BHP Billiton Limited (ASX: BHP), Orocobre Limited (ASX: ORE), Rio Tinto Limited (ASX: RIO), South32 Ltd (ASX: S32), and Whitehaven Coal Ltd (ASX: WHC).

But one share which has climbed more than its peers is nickel producer Western Areas Ltd (ASX: WSA). At the time of writing the Western Areas share price is up 10% to $3.30.

Why is Western Areas outperforming the rest of the sector?

Western Areas and fellow nickel producer Independence Group NL (ASX: IGO) are both outperforming their peers today. This could be down to nickel futures pointing higher and putting an end to their recent losing streak.

It could also be related to a research note out of Morgan Stanley this morning. Although the broker has retained its underweight rating on Western Areas’ shares, it has lifted its price target to $2.45 after upgrading its nickel forecasts through to FY 2020.

While the broker’s price target is well below the current share price, investors may be focusing more on the increase in its forecasts rather than its valuation.

Incidentally, last month analysts at Macquarie gave Western Areas an outperform rating with a $3.80 price target.

Time will tell which of the brokers makes the right call, but my money is on Macquarie at this stage due to the increasing demand for the metal to be used in lithium batteries.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Scott Phillips.

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