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BlueScope’s share price hits a more than 1-year high on broker upgrades

The de-escalation in the US-China trade war created a new market darling with at least two leading brokers upgrading the BlueScope Steel Limited (ASX: BSL) share price.

This sent the stock jumping 2% to a 14-month high of $15.51 on Monday when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index trailed with a 1.6% gain.

The gains by the steel products maker were bigger than other building materials companies too. The Boral Limited (ASX: BSL) share price fell 0.7% to $4.47 while the CSR Limited (ASX: CSR) share price inched up 0.2% to $4.79.

Upgraded on stronger steel assumptions

One broker that upgraded BlueScope is Macquarie Group Ltd (ASX: MQG). Its analysts lifted the recommendation on the stock to “outperform” from “neutral” and increased its price target to $16.50 from $14.00 a share.

The first phase trade deal between the US and China is giving sentiment a boost.

“While backward-looking economic data remains tepid, indicators are starting to turn,” said Macquarie.

“Receding trade tensions add to our Macro Strategy team’s constructive outlook for recovery in 2020, while the Macquarie Commodities Strategy team is also mildly more optimistic.”

Second upgrade

The mild uptick in optimism was enough for the broker to revise its commodity price forecasts. Macquarie sees renewed momentum in US steel prices after their winter season while Chinese steel production is forecasts to increase by 2.9% in 2020.

JP Morgan is another that turned bullish on BlueScope after it revised its steel price forecasts.

“Our new model incorporates raw material prices aligned with our mining coverage, and near-term steel/scrap prices based on the forward curve,” said the broker.

“We are attracted to BSL’s dominant Australian market position, North Star production growth, strong balance sheet, and focus on shareholder returns.”

JP Morgan upgraded its call on BlueScope to “overweight” with a $17 a share price target on the stock.

Foolish takeaway

BlueScope is also one of my growth stock picks for the new year, and despite its near 40% run since the start of the year, it still looks reasonably valued in my book.

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Motley Fool contributor Brendon Lau owns shares of BlueScope Steel Limited.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.