Freeport-McMoRan topped Q4 estimates early Wednesday, but Beijing's measures to revive China's economy appear to be the main impetus behind a jump in FCX stock and for rival Southern Copper past key levels. The price of copper rose 2.2% to $3.88 per pound after drifting lower in recent weeks.
China Stocks Bounce
The biggest sign of stimulus coming from China is the sharp bounce of its major stock indexes over the past two sessions. Hong Kong's Hang Seng Index rose 3.6% on Wednesday. That followed Tuesday's news that Beijing may deploy some of the $278 billion held offshore by state-owned enterprises to prop up its stock market.
Also, China's central bank announced a half-point reduction in the required level of cash banks must hold as reserves. That would allow about $140 billion to be deployed into the economy, such as for loans.
China's central bank often works to shore up markets ahead of the country's Lunar New Year Festival, which this year will close the Shanghai Stock Exchange beginning Feb. 9, to reopen on Feb 19. Markets tend to decline ahead of the holiday, as individual investors withdraw funds for the more-than-week-long holiday.
China's stock market hosts some 219 million individual investors, which accounted for an estimated 60% of trading volumes in the country's stock exchanges in 2022, according to the Wall Street Journal.
FCX Earnings
Freeport-McMoRan posted a Q4 profit of 27 cents a share, down 48% from a year ago, a nickel ahead of estimates. Revenue rose 2.5% to $5.91 billion, edging past forecasts of $5.86 billion.
Management said it expects average costs of $1.60 per pound of copper in 2024, effectively unchanged from $1.61 in 2023. However, Freeport now projects sales of 4.1 billion pounds of copper this year, below its October outlook of 4.2 billion pounds.
Capital expenditures are expected to fall to $4.6 billion in 2024 from $4.8 billion in 2023 as Freeport nears completion of its Indonesia smelter.
FCX Stock Leads Mining Rally
FCX stock rallied more than 7% in opening trade Wednesday, before easing to a 5.9% gain at 40.42. The move sent the stock above its converged 50- and 200-day moving averages. Freeport stock has carved out a handle with a 43.42 buy point on the end of a long consolidation. The handle is slightly more than 13% deep. Investors would normally look for handles that decline less than 12%.
The move also tested resistance at a downward trending line in the base's handle.
Southern Copper stock rose 2.6% to 84.o9, also testing the downtrend in a high handle-like pattern formed after a late-December breakout attempt faltered. That pullback for SCCO stock dropped it more than 7% to 8% below the cup-base buy point, triggering the stop loss rule.
SCCO stock has outperformed FCX over the past 12 months, and now sits just 5% off an all-time high.
Among other miners heavily exposed to China's economy, BHP rose 1.9%, Vale 2% and Rio Tinto 2.1%.
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