LAUNCESTON, Australia, May 23 (Reuters) - Iron ore prices cheered China's decision to cut its benchmark interest rate for mortgages by an unexpectedly wide margin, and there are several factors that suggest a renewed rally is on the cards.
Spot 62% iron ore for delivery to north China , as assessed by commodity price reporting agency Argus, jumped to $135.90 a tonne on May 20, up 5.7% from the previous day and the strongest close since May 6.
Domestic iron ore futures on the Dalian Commodity Exchange were also stronger, rising a more modest 3.4% to end at 827 yuan ($123.62) a tonne on May 20.
China lowered the five-year loan prime rate by 15 basis points to 4.45% in the monthly fixing on May 20, the biggest reduction since the interest rate mechanism was revamped in 2019 and more than the five or 10 basis points tipped by most in a Reuters poll. read more
The move was viewed by analysts as an attempt to boost the property and construction sectors, which account for about 25% of the economy and have been struggling in recent months amid Beijing's strict zero-COVID policy, which has led to extended lockdowns in several cities including the major financial hub of Shanghai.
Chinese Premier Li Keqiang said last week that Beijing will step up policy adjustments to return the world's second-biggest economy to what he termed normal growth.
