What does the Australian federal budget and our miners have in common? They have both defied the sceptics and are performing better than anyone dared hoped.
This is despite the share prices of our miners taking a beating today with the broader market tumbling due to a poor overnight lead from Wall Street.
The S&P/ASX 200 (Index:^AXJO) (ASX:XJO) is sliding 0.7% in lunch time trade but the mining heavy S&P/ASX 200 Materials (Index:^AXMJ) (ASX:XMJ) is copping a bigger beating with the index down 1.1% as heavyweights like BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) paced the decline.
But the sell-off is probably an opportunity to pick up some bargains as experts believe that the jitters afflicting equity markets have not changed the outlook for Australian shares.
This is particularly so for mining, a sector that is doing most of the heavy lifting when it comes to earning growth. This of course assumes that a global trade war doesn't break out and there are signs that trade tensions between the US and China are easing.
If you are wondering where to start your bargain shopping expedition, Macquarie Group Ltd (ASX: MQG) has three suggestions for you after its analysts upgraded its recommendation on some miners following its review on the outlook for commodity prices.
The biggest upgrade in Macquarie's commodities forecast is for manganese with the broker upping its price assumptions by 13% to 25% over the next five years and increasing its long-term price forecast by 50%!
"The material upgrades in pricing reflect a material improvement in the supply/demand balance thanks to reductions in domestic production in China due to environmental reforms," said Macquarie.
"The loss of this domestic production capacity is expected to see more high cost seaborne ore in the market in the long term."
The increase in its outlook for the ore was enough to convince Macquarie to upgrade South32 Ltd (ASX: S32) by two notches to "outperform" from "underperform".
The broker also upgraded Whitehaven Coal Ltd (ASX: WHC) to "outperform" from "neutral" on the back of its higher coal price forecasts even though New Hope Corporation Limited (ASX: NHC) remains its favoured coal stock.
The third stock to enjoy an upgrade is Orocobre Limited (ASX: ORE) with Macquarie moving its rating on the lithium and potash miner to "outperform" from "neutral".
But the upgrade was due more to the stock's underperformance with its share price crashing by nearly 20% since its poorly received half year results.
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