European Equity Strategy: Mining: has the pull-back gone too far?

研报英文原文证据摘录

European Equity Strategy: Mining: has the pull-back gone too far?

Mining: has the pull-back gone too far?

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What are the risks? From a top-down perspective, the upside risks are: (a) a renewed improvement in AI sentiment,

potentially driven by a further acceleration in US hyperscaler capex (with our US tech analysts further raising their capex

estimates this week; see: Internet/e-Commerce, Jul 7); (b) improving domestic demand in China, potentially in response

to fresh policy stimulus (though our economists do not expect anything to materialize on this front in the near term;

see: China Viewpoint, Jun 25); and (c) USD weakness, which could be driven by a more dovish Fed under Chair Warsh

(though our FX strategists remain positive on the USD into Q3; see: FX Viewpoint, June 25). The downside risks from a

top-down perspective are: (a) a renewed flaring-up of the US / Iran conflict, which would likely weigh on all cyclicals,

including mining; and (b) increasing signs that the AI capex boom is starting to crest.

From a bottom-up perspective, our mining analysts remain cautious on the large mining names in the near

term: they lowered their recommendation on a number of heavy-hitters in the sector in late May, given elevated

valuations, stretched positioning, a turn in the China credit impulse into negative territory, and concerns about global

macro risks (see: Rio Tinto, May 22 & BHP Group, May 22). They highlight that a number of clients argue that China has

become a less important driver of the copper price and, hence, of the mining sector, given the weakness in China’s

residential property sector, which has reduced one of the traditional pillars of metals demand. However, they argue that