Shares of major mining, base metals and steel companies were mixed Friday after Goldman Sachs downgraded the three sectors in light of China's moves to slow down its economy.
In a research note to clients, Goldman Sachs analysts Sal Tharani and David Stevens said the companies may face near-term risks because construction and automobile manufacturing could be more vulnerable as a result of China's actions.
China said Thursday its growth surged 10.7 percent in the final quarter of 2009 and 8.7 percent for the entire year. But inflation also picked up, which was a concern that led to its recent steps to keep growth under control.
China accounts for about 40 percent of global consumption of metals and steel. Chinese property and auto businesses account for more than 30 percent of these products, Tharani and Stevens said.
"Credit tightening by Chinese authorities historically has been done over a period of months and implemented in gradual stages. Even if it is not as aggressive this time as in the past, we believe that uncertainty will present a formidable headwind for shares," the analysts wrote.
Goldman downgraded the metals and mining and steel sectors to "Neutral" from "Attractive."
Freeport-McMoRan Copper & Gold Inc., one of the world's biggest copper producers, moved to "Neutral" from "Buy."
United States Steel Corp. was dropped from the "Conviction Buy" list but Goldman kept a "Buy" rating on it.
Although U.S. Steel is not directly dependent on Chinese demand, the analysts are concerned about domestic steel prices in the near term and that investors may sell the stock over worries about China's actions.
The analysts also lowered their rating for the base metals sector to "Neutral" from "Attractive," and revised their six-month share price target for Alcoa Inc. to $17 from $18.
In afternoon trading, shares of Freeport-McMoRan fell $1.28 to $75.01; U.S. Steel lost $1.62, or 2.8 percent, $56.04; and Alcoa gave up 66 cents, or 4.6 percent, at $13.59.
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