JPMorgan Research has upgraded its outlook for European mining equities, shifting more positive in February and then upgrading the outlook to Overweight in March. The research team cited a pattern of the sector outperforming through economic turbulences, believing a historical pattern could repeat.
Yet analysts acknowledge that the prediction hinges on the timing of China’s policy response—an important factor since its economy accounts for over 50% of global demand for most industrial metals. JPMorgan forecasts the reaction will focus on fiscal and monetary easing rather than property sector stimulus.
Owing to U.S. tariff policies, the bank now sees a 40% chance of a domestic recession this year, and China's GDP slowdown to 3% in Q2, down from 6.6% in Q1. With reciprocal tariffs, the effective rate on Chinese goods has now jumped to 54%, close to the bank's base case scenario of 60%.
On the downside, the bank is Underweight Boliden, pointing to lower treatment and refining charges, exposure to zinc, and integration challenges after acquiring Lundin's two European mines for $1.5 billion last year.
The bank remains bullish on EMEA gold miners, projecting a 30% rise in gold prices to ~$4,000/oz amid geopolitical and macroeconomic uncertainty. The top pick is Fresnillo (OTCPK: FNLPF), which it sees benefiting from potential Mexican peso weakness.
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