Sector movers: Broker commentary buoys miners

6th Oct 2014 13:45

Better-than-expected economic data Stateside and the prospect of further easing from the European Central Bank lent support to the shares of mining and basic resource companies on Wednesday.Positive broker commentary and a small up-tick in risk aversion as the US and its allies carried out a first wave of airstrikes overnight against IS targets in Syria were also a factor.New home sales in the US climbed 18% to a seasonally adjusted annual rate of 504,000 units, the highest since May 2008.In reaction to the report analysts at Barclays told clients in a note that: "Altogether, this is a much stronger report than expected and suggests housing demand has stabilised in recent quarters."The fresh data in America helped to offset a weaker than expected reading on the business climate in Germany, courtesy of the IFO institute, and a downwards revision by economists at Goldman Sachs to their forecasts for economic growth in China. They now foresee the Chinese giant's gross domestic product (GDP) expanding at a 7.1% pace this year, versus 7.6% before.As regards the latest broker commentary, analysts at UBS added Fresnillo's shares to a list of most-preferred stocks.Rio Tinto was also the object of an upgrade from Morgan Stanley to 'overweight' from 'equal-weight'.Iron ore miner Rio Tinto's chief executive officer is reintroducing the principles which held before the "super-cycle" at the miner, including a dividend pay-out ratio which averaged nearly 50%, the US broker said.That practice saw the shares trade at a 3% dividend yield or at 0.80 times relative to the FTSE All Share. As well, the company will again adjust its investments and pay-out ratio to the company's growth potential and the commodity price environment, the broker went on to explain.On that basis, it now sees dividend growth of 34-41% to $2.57-2.70 per share by 2016 (on base case and spot price scenario).That means potential exists for the dividend yield to fall from 5.0-5.5% in 2016 to 3.5-4.0%.