S&P/ASX 200 Index (ASX: XJO) iron ore shares are enjoying a big lift in intraday trading today.
The sudden tailwind boosting the share price of Aussie mining giants like Fortescue Ltd (ASX: FMG), BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO) looks to be blowing out of China.
During morning trade on Tuesday, investors learned that People's Bank of China (PBoC) is set to significantly increase its stimulus measures.
That news has done little to lift the benchmark index, which is down 0.3% at the time of writing.
As for the big three ASX 200 mining shares:
- The BHP share price is up 1.5%
- The Rio Tinto share price is up 2.5%
- The Fortescue share price is up 0.9%
Here's what's happening.
ASX 200 iron ore shares lift on Chinese stimulus hopes
As you're likely aware, ASX 200 iron ore shares have been under significant selling pressure in 2024 amid a rapid decline in the iron ore price.
While the big Aussie miners aren't solely reliant on iron ore, with commodities like copper playing an increasing role, the steel-making metal remains the top revenue earner for BHP, Rio Tinto, and Fortescue.
In early January, iron ore was trading for US$144 per tonne. That same tonne slipped below US$90 this week as demand from China's sluggish steel hungry property markets remains depressed.
That's seen investors sell down ASX 200 iron ore shares in 2024.
Despite today's welcome rebound, year to date BHP shares are down 20%; Fortescue shares are down 39%; and Rio Tinto shares are down 16%.
But we could be witnessing the early stages of a sizeable turnaround today.
What did China's central bank announce?
In a media briefing this morning, PBoC governor Pan Gongsheng announced a range of stimulus measures intended to bring China back to its 5% annual economic growth target and boost its struggling property sector.
On the back of that briefing, and clearly aiding the performance of the ASX 200 iron ore shares today, the iron ore price leapt 3.9% to US$92.90 per tonne.
Along with other stimulus measures, the PBoC will cut its cash reserve requirement ratio (RRR) for Chinese banks by 0.50%.
As Bloomberg reports, Pan says this could release US$142 billion in liquidity. The central bank governor sweetened the pot by hinting at another potential 0.25% to 0.50% cut to the RRR later this year.
Commenting on the move by the PBoC, Becky Liu, head of China macro strategy at Standard Chartered, said:
Monetary policy easing come bolder than expected, with both rate cuts and RRR [reserve requirement ratio] cuts announcing at the same time. We see room for bolder easing ahead in the coming quarters, following the Fed's outsized rate cuts.
If China's central bank does indeed announce a bolder easing in the coming months, that would likely offer further support for ASX 200 iron ore shares.
