Iron ore’s still under $95/tn. So why is BHP up +2% on Wednesday?

BHP (ASX:BHP), the ASX’s second largest company, was among the top 10 gainers on Wednesday morning – despite iron ore prices on the SGX remaining under US$95 a tonne through to today.

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So what’s going on? In a sentence: Renewed optimism for a positive outcome to China-U.S. trade talks. The Commerce Secretary, Howard Lutnick (a billionaire in his own right) suggested talks could wrap up as of Wednesday night, Australia time.

While materials companies’ prices rising and falling on the headline-driven perceptions of geopolitical macro is hardly remarkable, it is quite interesting to see The Big Australian make the top gainer boards based on such.

That’s especially true given $122.3M worth of BHP shares had traded hands as of late lunchtime Wednesday (though volume was at 3.1M versus an 8.49M 4W average).

The big point to take home is the company has a market cap of $198.8B and can easily tank the ASX200 on a quiet day if BHP gets hit by sellers.

Because of that, you can look at BHP like a gauge of sentiment broadly when it comes to the materials sector. That’s not a perfect gauge, true, but it’s good enough to make sense of the chaos inherent to markets.

With China being Australia’s largest trading partner, it isn’t hard to see many are bullish on what they’ve been hearing overnight, when it comes to U.S. trade policy.

What about the other Big Australian?

Still, Commonwealth Bank continues to dwarf BHP in terms of market cap, what with CBA boasting a cap of $305B – easily the largest on the bourse, and, according to some analysts, the most expensive bank stock in the world.

Commonwealth’s YTD run sees returns up nearly +20%, and a whopping +46% YoY.

That’s maybe not too surprising, seeing as there’s no safer safe haven ASX stock to invest in than CBA (Read: Investors are leaving the U.S., which is visible at least in the U.S. 10-year bond yield.)

BHP, however, isn’t having such a good time of it on metrics.

To that end, the Big Australian’s 1Y returns to investors are actually down -10.6%.

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And that correlates in large part with iron ore prices at Singapore falling below US$100/tn – something many analysts (and this finance journalist) have long been predicting would occur.

But clearly, news of an optimistic trade outcome between the US and China – or the possibility of lower tariffs, at least – has led to bullishness for the peak representative equity of Australia’s mining sector broadly.

BHP last traded at $39.24/sh, per Cboe live pricing at time of publishing.

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