Analysts at JPMorgan Cazenove have named Glencore PLC (LSE:GLEN) as their overall top pick for 2023 in a European Metals & Mining sector review, and have downgraded Rio Tinto PLC (LSE:RIO) to 'Underweight'.
In a note to clients entitled 'Crossing the Rubicon', the US bank's equity strategists pointed out that Metals & Mining is Europe’s number one performing sector in Q4 2022 - up 20% versus the MSCI - and said they are 'Overweight' on the sector in 2023 given that metals are a key beneficiary of China’s re-opening and because of positioning for a weaker US dollar.
The strategists’ base case is for a European and US recession in 2023, but that China reopens with 4.0% estimated GDP growth in 2023 and an upside scenario of more than 5%, so easy macro-comparatives in 2023 are likely to support superior growth momentum in China versus the Rest of the World.
They said: "We identify 2023 as marking a pivotal shift in cyclical and structural themes that have dominated miners’ share prices in recent years: 'green metals' demand growth, iron ore supply, capex and shareholder returns."
The strategists said their top picks in European Mining remain Glencore and Anglo American PLC (LSE:AAL) which are both rated 'Overweight'.
They said they have reduced Rio Tinto to 'Underweight' even though they expect strong tailwinds for the company in Q1 2023.