Miners drive market forward

Resource companies led the market yesterday, but can their gains be sustained?

a woman

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After plummeting 1.9% on Monday following the release of Chinese manufacturing data confirming that the nation's growth is indeed still slowing down (manufacturing expanded at the slowest pace in four months, according to The Australian Financial Review), the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) recovered triumphantly on Tuesday, adding 123.7 points, or 2.6%.

Resource and mining companies led the way, as stronger than expected US and European manufacturing data was released overnight. Meanwhile, commodity prices also saw significant gains, further easing investors' tensions.

Following a dismal few weeks of trading, mining heavyweight BHP Billiton (ASX: BHP) was one of the better performing blue chips, having gained 3.65%. Other companies, like Newcrest Mining (ASX: NCM) and Rio Tinto (ASX: RIO), also realised gains of 6.8% and 2.6%, respectively, as copper, oil and gold increased between 1.4-3.4% overnight on Monday.

BHP also notified the market that its preliminary results would be announced on 20 August and will go ex-dividend on 2 September. Furthermore, the company will continue to cut operational costs by accelerating modernization of its Pilbara iron ore division.

Foolish takeaway

Whilst the US and European announcements are certainly a good sign for our resource companies, it reflects a very short time span without taking the longer term into account. With growth slowing down significantly in China, it appears that there will be heavy volatility in the mining industry for some time yet. It would be wise for investors to remain on the sidelines until the volatility begins to subside or until share prices get much more attractive than their current levels.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

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