Finally some good news for our miners

Finally some good news for mining shares

A glimmer of hope after ECB announcement

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published September 7, 2012 11:55 am AEST

Overnight news has spurred our market higher this morning, with resources stocks amongst the biggest winners.

The European Central Bank (ECB) announced plans to start buying sovereign debt from struggling countries, enabling governments to keep their borrowing costs low, which should allow them time to restructure their economies. That jolted the European and US markets higher, with the UK's FTSE 100 and the US S&P 500 indices both rising by more than 2%.

It also contributed to gold adding 0.7% to US$1,705 an ounce, and China iron ore added 30 cents to trade at US$87 a tonne. While the moves were small, the direction was more important.

As at 11.30 am, the S&P / ASX 200 Index (Index: ^AXJO) (ASX: XJO) is up 0.5%, with many of the resources related companies recovering some of their losses. Fortescue Metals Group's (ASX: FMG) shares rose by more than 5%, Boart Longyear Limited (ASX: BLY) was up 8.3% to $1.375, NRW Holdings (ASX: NWH) recovered 6.1% to $2.26 and Emeco Holdings Limited (ASX: EHL) gained 6% to 70.5 cents.

Of the top 10 movers on the ASX 200, all are resources or mining services companies.

Investors will be hoping the trend continues, with many nursing large losses over the last fortnight, as the iron ore price crashed, taking many stocks with it. Fear then appeared to enter the market, with some stocks heavily sold off. At one stage, Boart Longyear was trading on a prospective P/E ratio of just 3.

The news from the ECB suggests that China should avoid a protracted slowdown, and potentially propping up demand for Australia's commodities in the short-term.

The Foolish bottom line

Whether the latest news from Europe is a real turning point, or yet another false dawn remains to be seen, but investors were enjoying a little good news this morning at least.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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