RBC starts Glencore at neutral

RBC saw possible short-term catalysts for Glencore, but added that the outlook was 'mixed'.

The shares should rally further as the commodities trader unveiled further asset sales and operational improvements, with a 10 December update serving as one potential catalyst, Tyler Broda and Alexandra Slattery said in a research note sent to clients.

Indeed, the company was likely to announce more asset sales than had originally been targeted, which would help it to hold on to its investment grade credit rating through 2016 as long as the reference price for copper remained above a $2.10/lb.

A credit downgrade to 'junk' was not out of the question, although it would not be the end of the world for Glencore, the analysts added.

"A downgrade, although clearly a negative for medium-term funding, is not likely to cause significant issues for the day-to-day funding of the
marketing business."

Even so, the increased cost of equity meant the up-side potential for the firm's equity was moderate and the medium-term risks were elevated, they said.

RBC initiated coverage on the stock at 'neutral' with a 100p target price.