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.
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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.
