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The Zacks Analyst Blog Highlights: Rio Tinto, Fortesque and Ternium

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For Immediate Release

Chicago, IL – December 22, 2020 – announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Rio Tinto (RIO - Free Report) , Fortesque Metals (FSUGY - Free Report) and Ternium S.A. (TX - Free Report) .

Here are highlights from Monday’s Analyst Blog:

A New COVID Strain: Global Week Ahead

Stating the obvious, this is Xmas week. Yet, this is far from a normal holiday season.

In the Global Week Ahead, traders will be focused on the details of the U.S. $900B COVID amelioration package. This got finalized by the U.S. Congress late Sunday.

A major set of Asian monetary decisions await us too. The week opens with a key monetary policy decision by the People’s Bank of China (PBoC).

Finally, if the Aussie PM says something positive about China this week, that would be another source of an upside global markets surprise.

But to start this week, that good set of possibilities are being overlooked, for the most part.

In the U.K., fresh domestic lockdowns, and new travel bans to the U.K. from the E.U. were announced. A new COVID strain was determined to be found in the U.K.

The Financial Times opened up their Monday version with this related news.

“The French government has called for a strict new coronavirus testing regime to curb the spread of the new variant as it signaled it was ready to lift a ban on travel from the U.K. on Wednesday morning.

“Thousands of truck drivers are stuck on each side of the English Channel following the 48-hour closure of one of the world’s biggest trade routes by France and some of its EU partners.”

Travel companies led a major European share sell-off. Oil prices plunged -3.5%. It appeared that news of the new COVID virus strain dominated all the other stories.

Oh, and then there is the looming Brexit deadline. A Karmic finale for 2020 is underway in the U.K.

U.S. futures traded down significantly, -1.0% to -1.5%.

Next are Reuters’ five world market themes, reordered for equity traders---

(1) Xmas Season and COVID Restrictions Clash

Christmas is coming and many countries are torn between giving citizens a respite from stringent restrictions and tightening those restrictions with coronavirus cases soaring.

Recent days saw the toughest tier of restrictions imposed on much of England, Germany going into full lockdown and South Korea facing its worst outbreak since the pandemic started.

Germany and the UK will relax rules slightly so families can celebrate. JPMorgan predicts the impact of UK easing on infections, hospitalizations and deaths could be huge, making a January national lockdown more likely.

Yet nothing seems to stymie the year-end Santa rally with world stocks, oil prices and bitcoin in a festive mood, feasting on U.S. stimulus bets and COVID-19 vaccines hopes. Signs that the New Year will bring new lockdowns could serve as a cruel reminder that the global economy will be dealing with virus aftershocks well into 2021.

(2) Buying the U.K. — Is All Bad Brexit News Priced in?

With the clock ticking and British and European negotiators in the tunnel, weary investors are looking again at unloved British assets.

Some argue they might deserve a second chance. Since the 2016 Brexit referendum vote, global investors have ditched British assets, with the country’s stock market suffering $60 billion of outflows.

The pound is among the most undervalued of the major currencies on a trade-weighted basis, while equity risk premia for the stock market are above their long-term average.

With policymakers likely to keep monetary conditions ultra-easy, Britain’s economy may benefit in 2021 from the nationwide rollout of a COVID-19 vaccine.

(3) Watch the Money Decisions in Mainland China

China fixes its benchmark lending rate on Monday with investors looking for clues on the outlook and attitude of the People’s Bank of China and the country’s economic planners.

Almost no one forecasts a move. But recovery risks are emerging, lately highlighted by a slew of defaults, prompting the PBOC to pour cash into the banking system — an accommodative move against an expected drift toward tightening. The annual closed-door Central Economic Work Conference — to be held soon — will focus on this balancing act.

As global investors tip Chinese debt as a top buy, perhaps recent resistance to the yuan’s rise and a widening gap between its onshore and offshore prices points to discomfort on one side of the trade — and complacency on the other.

(4) Tesla Now in the S&P 500

Tesla joins the S&P 500 on Monday, and index funds will snap up some $80 billion worth of the electric carmaker’s shares to adjust portfolios.

Tesla shares have surged almost 700% year-to-date, putting its stock market value at over $600 billion and making it the sixth most valuable listed U.S.-company.

Some say its share price is far ahead of fundamentals and there is a hot debate on where the stock will go from here. Analysts have an average price target of $396.30 per share, more than a third below its current price — though estimates vary from $40 to $774 per share.

(5) The Nation of Turkey in Macro FX Trouble

Turkey’s central bank governor, Naci Agbal, has another chance to confirm the country’s return to orthodox monetary policy on Dec. 24.

Markets cheered his November move to bump the benchmark up to 15% as well as the commitment to put price stability at the centre of monetary policy.

A Reuters poll showed analysts expect the central bank to raise rates again between 100 and 200 basis points. With geopolitical tensions in no short supply, investors want to see the central bank follow through on Agbal’s pledges.

Top Zacks #1 Rank (STRONG BUY) Stocks

I figured it was worth doing a deep dive into iron ore mining and steel stocks this week.

They have been on fire, the Zacks #1 Ranks are there to support the move, and the long-term Zacks VGM scores are all excellent.

(1) Rio Tinto: This New Zealand, Australia, South Africa, Europe and Canada mining giant’s shares price at $77 each, making the stock have a market cap of $95.6B. I see a Zacks Value score of A, a Zacks Growth score of A and a Zacks Momentum score of A. Iron ore prices are on fire.

(2) Fortesque Metals:This is another Aussie mining stock. Shares price at $35 each, making for a $53.1B market cap. I see a Zacks Value score of B, a Zacks Growth score of A and a Zacks Momentum score of A.

(3) Ternium S.A.:This is Latin American flat and long steel stock. It consolidates the operations of the steel companies Hylsa in Mexico,Siderar in Argentina and Sidor in Venezuela. Shares price at $30.60 each, making for a $6.0B market cap. I see a Zacks Value score of A, a Zacks Growth score of B and a Zacks Momentum score of A.

In short, put this sector on your radar. The short side, however, will attack if and when the run-up in iron ore prices disappears.

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