A combination of record highs for the US S&P 500 and strong metals prices has led to a positive session for the Aussie stock market this morning

Mining stocks are again leading the way higher today as investors scrabble to catch up with the positive impact of persistently higher metals prices. The ASX 200 index is also benefitting from support for bank stocks after a strong session for the financial sector on US markets last night.

However, there are signs that investors are making way for materials stocks in their portfolio by reducing exposure to other sectors which restraining gains in Australia 200. Interest sensitive sectors like Utilities and Real Estate are being sold as bond yields show signs of rising again.  

Rio’s sale of its thermal coal assets has helped improve the mood for mining stocks. The market is pleased with the price and timing of the sale which looks to have extracted good value from the resurgence in coal prices but is seen as a sensible exit from an industry in long term decline. Assuming the sale receives regulatory approval, it will also see further improvement in Rio’s balance sheet adding to the likelihood of funds being returned to shareholders.

BHP’s quarterly production report continues the trend of solid operational performance by the major miners. The need for unplanned maintenance at Olympic Dam and a 2% cut in copper guidance for the year is a minor blemish. The market is not fazed by planned reductions in oil production due to lower prices that are likely to pay off over the long term as oil prices improve.