Bank of America downgrades miners, ups energy stocks after commodity divergence

(Sharecast News) - Valuations across the listed European resources sector look "stretched in both direction", according to Bank of America Securities, which downgraded the mining sector to 'underweight' and upgraded energy stocks to 'overweight'.

Rising metal prices over recent months, such as the 50%+ surge in copper to record highs and jumps in gold and silver to new peaks, as coincided with a drop in oil prices to a four-year low.

This, according to BofA, has led to a "decoupling" among European resources stocks, with the copper-to-oil ratio now at a 40-year high. Mining stocks have outperformed by 40% since April 2025, while energy has underperformed by 15%.

As a result, "potential downside risks stemming from the [mining] sector's macro drivers are becoming hard to ignore", the bank said, citing potential falls in copper prices, macro risks and potential strength in sterling which could weigh on stocks.

"Taken together, our macro projections imply around 15% mining underperformance by year-end, leading us to lower the sector from marketweight to underweight," BofA said.

"Meanwhile, after nearly 10% underperformance since early December, the energy sector's overshoot to the oil-implied trajectory has now largely closed, with our commodity strategists' expectations for oil to fade back to around $60/bbl pointing to scope for only limited further underperformance this year. As a consequence, we lift the sector from underweight to marketweight."

Elsewhere, the bank said it remains underweight on banks, but has raised the insurance sector across Europe to marketweight following recent weakness.