MENU

Why Dr. Copper thinks skittish share investors are wrong to sell risk assets

The copper price is doing a very strange thing. The commodity chalked up its fifth straight session of gains on the London Metal Exchange (LME) as equity investors run for cover with the risk of an ugly trade war looming large.

The “risk-off” sentiment is sending the S&P/ASX 200 (Index:^AXJO) (ASX: XJO) index tumbled 0.8% in after lunch trade.

Someone must have forgotten to tell Dr. Copper or copper traders know something the rest of us don’t.

The red metal, which has been bestowed a “doctor” title as it is seen as a bellwether for the commodity market, gained 0.9% to US$6259 a tonne (three-month forward futures contract) last night and is up 2.5% on the week.

Why copper is rising

Experts interviewed on Bloomberg believe copper is gaining ground on hopes of a truce between US president Donald Trump and China’s chief Xi Jinping at the G20 summit next week.

A drop in copper inventories held at LME-registered warehouses is also supporting the positive sentiment towards the metal.

The rise in the copper price is one likely reason why the BHP Billiton Limited (ASX: BHP) share price and the Rio Tinto Limited (ASX: RIO) share price are defying the broader market weakness and is trading just above breakeven at the time of writing.

The diversified mining giants have exposure to the commodity although pure copper miners aren’t enjoying much love today with the OZ Minerals Limited (ASX: OZL) share price and the Sandfire Resources NL (ASX: SFR) share price losing more than 2% of their value.

Will the copper party last?

How long the positivity towards copper will last really depends on what you think is the major support for the commodity.

I don’t think it’s wise to bet on a de-escalation in trade tensions between the two superpowers as the recent APEC meeting laid bare a deepening divide between the world’s two largest gorillas.

However, I am bullish on copper over the medium-term as China is likely to step up its infrastructure building efforts to offset the impact of a trade war, while copper supply is likely to tighten due to underinvestment in finding new copper supply by the miners.

I believe investors should be overweight on the mining sector for 2019, although these aren’t the only stocks that are well placed to outperform.

The experts at the Motley Fool are also tipping these non-resources blue-chip stocks for 2019 and you can find out what they are by clicking on the free link below.

Top 3 ASX Blue Chips To Buy For 2019

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2019."

Each one pays a fully franked dividend. The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited and Rio Tinto Ltd. 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.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!