Jefferies cuts targets for miners, but still sees upside

Jefferies has trimmed its targets for a host of blue chip mining stocks after calculating the impact that Donald Trump's sweeping trade tariffs would have on export demand and commodity prices.
Nevertheless, the broker said that, while miners are likely to experience a "period of weakening demand" due to additional export levies, stocks in the sector are now at "attractive levels for those who can ride out near-term volatility".

Jefferies has cut Anglo American's target price from 3,000p to 2,700p, cut Glencore from 430p to 380p and Rio Tinto from 6,000p to 5,700p - though all three stocks are still rated a 'buy'.

BHP, which has had its target price lowered from 2,150p to 1,800p, is rated a 'hold'.

In the near term, Jefferies predicts that US buyers who have recently accumulated excess inventory of metals will "step out of the market and de-stock" as a result of the tariffs lifting domestic prices.

"This air pocket risk is greatest in copper, aluminum and steel, in our view. More broadly, there is also risk of a sharp slowdown in global growth, which could lead to significantly lower commodity prices. However, this risk appears to be at least partially (but not entirely) reflected in the equities already as valuations have materially de-rated," the broker said.

The most significant cuts Jefferies has made were to seaborne coal price forecasts, while gold estimates have been raised as inflationary fiscal, monetary and trade policies and greater geopolitical risk support precious metal prices.