Berenberg downgrades Rio Tinto to 'sell', expects downside surprise in 1H results

The first major negative catalyst would be the miner's first half results on 27 July, they said, due to higher costs at its iron ore and aluminium units.

That was despite its shares having sold-off with the broader sector, having fallen by 16% since the start of June while the Stoxx 600 Basic Resources gauge had dropped 20%.

Their estimates for Rio Tinto's earnings per share were 13% below consensus for the front half of the year and surprise to the downside on the day.

"A precursor to this will be the Q2 operating review on 15 July, which, while likely better than Q1, is still set to bear the marks of challenging operating conditions, particularly in Australia."

In the the same report they also slashed their target price from 6,500.0p to 4,200.0p.

Commenting on wider sector, the analyst said: "The mining sector's weakness has been exacerbated by the weak historical performance of industrial metals during recessionary periods.

"We think the summer period will offer limited positive news, with the recession narrative likely to take hold, and China, which tends to be the key driver of positive sentiment in the mining sector given its dominance in terms of demand for raw materials, is unlikely to materially fire into action until later this year, again offering limited commodity price support over the summer months."