The metal and mining sector is highly dependent on China's -
the largest consumer of steel - economic growth. Reportedly,
China's steel industry has overcapacity of 300 million tons,
which may pose a great threat to the global steel industry.
Recently, a private survey by
HSBC Holdings plc
) quantified a lower-than-expected Purchasing Managers' Index
(PMI) for China in March 2014. A PMI score of 50 and above is
considered to be favorable. However, the PMI for China fell to an
eight-month low of 48.1 in March, declining from 48.5 a month
ago. The primary reason for the decline is assumed to be weaker
domestic demand, where export orders increased sequentially.
Generally, the PMI for China increases sequentially in March,
due to the Chinese New Year. However, this does not seem to be
the case here, leading to disappointment across indices.
Following the PMI data release, the FTSE 100 Index fell 0.6%
to 6,520.39 as major players in the index recorded a fall.
Although, the preliminary reports from HSBC expect a rebound in
the Chinese economy, the expected pace and quantum is
However, a day later, investors' confidence received a boost
from improved U.S. consumer-confidence data, which reached a
six-year high. According to the Conference Board, the consumer
confidence reached 82.3 in March, from 78.3 in February.
Investors expect the U.S. markets to improve given the record
consumer-confidence data. Moreover, it is believed that the lower
PMI will compel the Chinese government to introduce measures to
enhance growth and stability in its economy.
The shares likely to benefit from the economic growth recorded
an increase in the share prices. London-based
Rio Tinto plc
) witnessed a hike of 3.52% to $54.65 on Mar 25, while
BHP Billiton Ltd
) share price increased 2.76% to $66.86 the same day.
BHP BILLITN LTD (BHP): Free Stock Analysis
HSBC HOLDINGS (HSBC): Free Stock Analysis
RIO TINTO-ADR (RIO): Free Stock Analysis
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