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Jefferies slashes miners' rating as escalating China tensions weigh

08/06/2019 | 06:38am EST

(Reuters) - Jefferies lowered its ratings on several miners on Tuesday and reduced its commodity price forecasts, weighed by increasing chances of the Sino-U.S. trade war having a "significant impact" on the global demand for metals.

Tensions between the United States and China intensified over the past few days, after U.S. President Donald Trump vowed to impose a 10% tariff on $300 billion of Chinese imports from Sept. 1.

Adding to the woes, the U.S. Treasury Department announced late on Monday that it had determined for the first time since 1994 that China was manipulating its currency. The yuan broke past the symbolic 7-per-dollar level on Monday after China let the currency slide in response to the latest U.S. tariffs.

Jefferies said these developments, including the devaluation of the yuan and tightening measures in Chinese property markets, suggested that a cyclical recovery has now been pushed back further.

Any measures to tighten lending for the real estate sector could have a major impact, as Chinese property markets account for about 15% of global demand for metals, Jefferies analysts wrote.

"A slowdown in construction and a decline in Chinese manufacturing and exports due to trade wars would be significant negatives for metals' demand, even if fiscal/monetary stimulus leads to some recovery in the broader Chinese economy," the brokerage said in a note.

Jefferies cut its ratings on Rio Tinto Ltd, BHP Group Ltd, Fortescue Metals Group, Peabody Energy Corp and Arch Coal Inc to 'hold' from 'buy'.

The brokerage now prefers copper miners over iron ore and coal miners. It reduced its 2019 price forecast for iron ore fines (CFR China) by over 10% to $88 per tonne, while that of iron ore lump (CFR China) was cut to $106 per tonne.

(Reporting by Tanvi Mehta and Geetha Panchaksharam in Bengaluru; editing by Gopakumar Warrier)

ę Reuters 2019
Stocks mentioned in the article
ChangeLast1st jan.
ARCH RESOURCES, INC. -0.53% 97.91 Delayed Quote.7.22%
BHP GROUP 2.74% 46.92 Delayed Quote.13.06%
BHP GROUP PLC -2.35% 2385.5 Delayed Quote.8.32%
CANADIAN DOLLAR / CHINESE YUAN RENMINBI (CAD/CNY) -0.31% 4.9829 Delayed Quote.-0.52%
EURO / CHINESE YUAN RENMINBI (EUR/CNY) -0.11% 7.0881 Delayed Quote.-1.76%
EURO / US DOLLAR (EUR/USD) 0.03% 1.1147 Delayed Quote.-1.99%
FORTESCUE METALS GROUP LIMITED -0.15% 19.45 Delayed Quote.1.25%
PEABODY ENERGY CORPORATION 1.72% 11.23 Delayed Quote.11.52%
RIO TINTO GROUP 4.09% 113.76 Delayed Quote.13.64%
RIO TINTO PLC -3.47% 5376 Delayed Quote.10.10%
UNITED STATES DOLLAR (B) / CHINESE YUAN IN HONG KONG (USD/CNH) -0.10% 6.36225 Delayed Quote.0.19%
US DOLLAR / CHINESE YUAN RENMINBI (USD/CNY) 0.00% 6.3605 Delayed Quote.0.19%
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Financials (USD)
Sales 2021 3 129 M - -
Net income 2021 3,50 M - -
Net Debt 2021 90,0 M - -
P/E ratio 2021 -41,6x
Yield 2021 -
Capitalization 1 453 M 1 453 M -
EV / Sales 2021 0,49x
EV / Sales 2022 0,44x
Nbr of Employees 4 600
Free-Float -
Duration : Period :
Peabody Energy Corporation Technical Analysis Chart | BTU | US7045511000 | MarketScreener
Technical analysis trends PEABODY ENERGY CORPORATION
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 4
Last Close Price 11,23 $
Average target price 16,75 $
Spread / Average Target 49,2%
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Managers and Directors
James C. Grech President, Chief Executive Officer & Director
Mark A. Spurbeck Executive VP, Chief Financial & Accounting Officer
Robert A. Malone Non-Executive Chairman
Darren R. Yeates Chief Operating Officer & Executive Vice President
Scott T. Jarboe Secretary, Chief Administrative & Legal Officer