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 man sits in deep thought with a pen held to his lips as he ponders his computer screen with a laptop open next to him on his desk in a home office environment.
Share Market News

What does Macquarie think Origin Energy shares are worth?

Let's see what the broker is saying about this energy giant.

Read more »

A female sharemarket analyst with red hair and wearing glasses looks at her computer screen watching share price movements.
Broker Notes

Up 34% this year, can Challenger shares keep rising according to Macquarie?

The leading broker has released a new research note.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Share Fallers

Guess which ASX 200 stock is crashing 42% on big news

Big bad news is weighing heavily on this stock today.

Read more »

An analyst wearing a dark blue shirt and glasses sits at his computer with his chin resting on his hands as he looks at the CBA share price movement today
Opinions

Expert's verdict on 3 ASX 200 shares (2 have doubled in value and the other has lost 29%)

Two of these stocks were the best performers of their sectors in FY25. Should you buy, hold, or sell?

Read more »

A male ASX 200 broker wearing a blue shirt and black tie holds one hand to his chin with the other arm crossed across his body as he watches stock prices on a digital screen while deep in thought
Share Market News

5 things to watch on the ASX 200 on Wednesday

Here's what to expect on the Australian share market today.

Read more »

The silhouettes of ten people holding hands with their arms raised against the sky, as the sun rises or sets in the background.
Share Gainers

Here are the top 10 ASX 200 shares today

The ASX managed to bank a small rise this Tuesday.

Read more »

Sport trainer talking to little girl who is climbing wooden ladder in gym.
Share Gainers

Why Vault Minerals, Droneshield, Westgold Resources shares are climbing higher today

These shares are gaining on Tuesday, but why?

Read more »

A hipster-looking man with bushy beard and multiple arm tattoos sits on the floor against a sofa reading a tablet with his hand on his chin as though he is deep in thought.
Share Market News

ASX 200 slides on unexpected RBA interest rate call

The ASX 200 is tumbling on the RBA’s latest interest rate announcement.

Read more »