Prices of iron ore, a key industrial metal seen as a proxy for demand in the global economy, spiked by a record 17% on Monday. Analysts said it's a reflection of confidence over the direction China's demand for goods following a closely-watched government meeting in Beijing this weekend.
The iron ore surge isn't a one-off blip. Since the beginning of the year, this key ingredient in steel has risen 54% to nine-month highs.
The rebound could be excessive, but still the latest evidence of the global market's better mood of late. Investors are realizing that fears of China leading the world into a recession were overdone. The global economy isn't going gangbusters, but it's not collapsing either.
"The rip in iron ore is nothing short of breathtaking," Bespoke Investment Group wrote in a research report. "The strength in metals is something to behold and if they were to turn around, it would mark the end of a major stress on global equity and credit markets."
Collapsing oil and industrial metals prices helped fuel the market freakout of early 2016. Commodity stocks tanked, putting pressure on the big banks that loaned these companies money during the boom years.
China fuels optimism
But the stock and commodity markets have calmed down over the past three weeks. The Dow is now up an incredible 1,600 points from its February 11 low.
Shares of Cliffs Natural Resources (CLF), a leading iron ore supplier, soared 19% on Monday. Brazilian miner Vale (VALE), another major iron ore company, jumped by 10%.
Metals watchers believe Monday's iron ore surge was mostly fueled by optimism about the ability of China's leaders to avoid a disastrous hard-landing of its economy. Leaders met in Beijing on Saturday as the annual meeting of the National People's Congress began.
Investors were encouraged by China raising its official budget deficit in order to fund tax cuts and spend more on infrastructure, Capital Economics said. For instance, China plans to ramp up rebuilding of homes for shantytown residents.
By: Matt Egan (CNN).
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