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Mining Stocks Hovering Near Pre-QE1 Level: April 8, 2012
By The National Bank of CanadaCommoditiesApr 06, 2012 01:11AM ET
www.investing.com/analysis/mining-stocks-hovering-near-pre-qe1-level:-april-8,-2012-119340
Mining Stocks Hovering Near Pre-QE1 Level: April 8, 2012
By The National Bank of Canada | Apr 06, 2012 01:11AM ET Global equities have struggled in recent days with the commodity-related sectors taking the brunt of the decline. Energy, base metals and gold stocks remain more than 20% off their cyclical peaks of a year-ago. In fact, when you look at the level of the respective indexes, we note that all of them are hovering near the levels that prevailed in mid-2010, i.e., before the Fed hinted at QE1 (as today’s Hot chart shows, the Diversified and Mining index of the MSCi AC index is a case in point).
Back then, the global economy was arguably on shakier ground than it is now (as such valuations are much better now). However, we think the USD is currently too weak versus the euro. In our opinion, this remains the main headwind for resource stocks. If the euro weakens – our baseline assumption – then the current commodity price deck that underpins current valuations of resource stocks must be revised down. For example, the current bottom-up consensus of analysts still expects copper prices to be at more than $4/pound by the end of the year.
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Mining Stocks Hovering Near Pre-QE1 Level: April 8, 2012
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