Why ASX miners will get a double tailwind from Biden's US$1.9tn stimulus

The market is expected to kick off the week on a positive footing, but it's the ASX miners that could be leading the charge tomorrow.

speedometer depicting high performance ASX miners outperform

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The market is expected to kick off the week on a positive footing, but it's the ASX miners that could be leading the charge tomorrow.

The S&P/ASX 200 Index (Index:^AXJO) is likely to follow the positive leads from Wall Street with the S&P 500 (INDEXSP: .INX) jumping 0.4%.

The market is getting excited about US President Joe Biden's US$1.9 trillion stimulus package. It's looking increasingly likely that this generous package will pass Congress. The disappointing US job report released on Friday will just about guarantee it.

Double benefit to ASX mining shares

While this wall of cash will lift risk assets, it will provide ASX miners with a double tailwind.

The first tailwind relates to the US dollar, which tumbled on the news. The huge stimulus will significantly add to the US government's burgeoning debt burden. This will keep the greenback under pressure.

You can see this from the jump in the Australian dollar over the weekend. The Aussie was trading under US76 cents but popped to just under US77 cents. That may not sound like much to you, but it's a sizable move to make in a day.

ASX miners benefitting from the weaker US dollar

The weakening US dollar in turn gave commodities a big boost. Dr Copper led other industrial metals higher with a 2% jump to US$3.63 a pound, while the gold price gained 1.2% to US$1,813 an ounce.

That's great news for the likes of the OZ Minerals Limited (ASX: OZL) share price, South32 Ltd (ASX: S32) share price and Newcrest Mining Ltd (ASX: NCM) share price.

The falling US dollar is also likely to give the iron ore price a lift on Monday, so watch out for the Fortescue Metals Group Limited (ASX: FMG) share price and Rio Tinto Limited (ASX: RIO) share price as well.

Stimulus gift that keeps giving

The second tailwind from Biden's US$1.9 trillion "gift" will come from economic growth. As the stimulus gives the US economy a shot in the arm, it will also brighten the outlook for global growth.

Demand for commodities is directly linked to economic activity, so the lift in sentiment will give ASX miners a second booster shot.

These trends also apply to ASX energy shares that are exposed to the oil market. The Brent crude price gained 0.9% to US$59.34 a barrel over the weekend. This should see the Santos Ltd (ASX: STO) share price and Woodside Petroleum Limited (ASX: WPL) share price rise on Monday too.

Not all ASX shares are winners

On the flipside, large cap ASX industrial shares could lose some favour despite the positive market sentiment. Many of these companies sell products in US dollars and the income they make will be lower when converted back into the local currency.

Fortunately, this isn't enough to rain on the bull market's parade.

Motley Fool contributor Brendon Lau owns shares of Newcrest Mining Limited, OZ Minerals Limited, Rio Tinto Ltd., Santos Limited, and South32 Ltd. Connect with me on Twitter @brenlau.

The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Share Gainers

Why Dimerix, Newmont, Regal Partners, and Titomic shares are storming higher

These shares are having a good finish to the week. Let's see why.

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Broker Notes

Morgans says these ASX can rise 30% to 50%

The broker has good things to say about these shares.

Read more »

Two businessmen look out at the city from the top of a tall building.
Broker Notes

2 ASX REITs to buy in July: expert

Is it time to consider ASX REITs?

Read more »

Delighted adult man, working on a company slogan, on his laptop.
Broker Notes

Broker tips 20% upside for these ASX utilities shares

Bell Potter sees upside in these two shares.

Read more »

A beautiful woman with brown hair and wearing bright red lipstick looks shocked as she holds her hand to her cheek in response to the crumbling Adore Beauty share price today
Broker Notes

3 ASX consumer sector shares to avoid in July: expert

If you're looking to buy ASX consumer shares in July, read on.

Read more »

A little girl with red hair runs excitedly with a rocket strapped to her back, trying to launch.
Broker Notes

106% upside? Expert says this ASX All Ords small cap mining stock could explode

Big upside potential.

Read more »

ETF spelt out
Share Market News

New ASX ETF set to launch from Global X

The ETF provider announced a new ETF 

Read more »

A man in a business suit scratches his head looking at a graph that started high then dips, then starts to go up again like a rollercoaster.
Broker Notes

Buy the dip on these 2 ASX 200 shares: experts

Experts say these 2 ASX 200 shares are a buying opportunity today.

Read more »