Macro Intelliegence: how geopolitical tensions are reshaping markets and ASX opportunities
Geopolitical risks like the Russia-Ukraine war and Israel-Hamas conflict are driving gold, energy, and defence stocks. Discover how the ASX is affected and which shares stand out in uncertain times.
Article written by Juliette Saly (ausbiz)
Geopolitical risks
In this week’s edition of IG Macro Intelligence, we examine the rising global geopolitical tensions and the Australian stocks that could be affected.
Tensions rising
The world, and consequently the global economy, is currently facing a number of geopolitical risks, including the Russia-Ukraine war, the Israel-Hamas conflict, and threats of another US-China trade war.
Geopolitical conflicts can not only cause disastrous humanitarian loss but also pose significant threats to the global economic outlook, affecting economic growth, inflation, financial markets, and supply chains.
S&P Global warns that risks posed by current social and political unrest could threaten the world’s energy and food security.
Meanwhile, the International Monetary Fund (IMF) has flagged a 58% chance that global growth in 2025 will fall below its World Economic Outlook baseline but argues that tail risks remain manageable thanks to supportive financial conditions and healthy credit growth. However, the IMF warns that if geopolitical risks increase and financial conditions tighten, the probability of 2025 growth dropping below their baseline could rise to 75%, akin to the COVID crisis, signalling greater downside risks.
Global growth forecast
Safe-haven plays
One of the clearest "safe-haven" market winners amid geopolitical unrest has been Gold.
Gold prices have risen by 30% this year, driven by strong central bank purchases, safe-haven demand, and Federal Reserve rate cuts. Goldman Sachs Group and UBS recently projected that the rally in bullion would extend into 2025, with both firms predicting the price of the precious metal will reach $3000 an ounce next year.
Value of bullion in USD 2024
Oil prices stabilise amid geopolitical tensions
Meanwhile, oil prices have steadied after their largest weekly gain in nearly two months, driven by escalating geopolitical tensions in Ukraine and the Middle East. The conflict in Ukraine, coupled with Iran’s plans to expand nuclear fuel production, has raised concerns about supply disruptions.
Bullish sentiment for crude is growing, reflected in Brent’s three-month spread widening to $1.21 a barrel in backwardation last week. Backwardation occurs when the spot, or cash, price of a commodity is higher than the forward, or futures contract, price.
Brent three-month spread chart
Stocks to watch
Retail stocks in the index include:
Newmont Corp
Technical indicators suggest Newmont Corp's (ASX: NEW) shares are currently in a downward trend, despite the company having risen approximately 15% over the past year.
As the world’s largest gold miner, Newmont Corp is headquartered in Colorado and is dual-listed on the S&P 500 and the ASX 200. Its operations extend across gold mines in the US, Canada, Australia, Mexico, the Dominican Republic, Ghana, Suriname, Argentina, and Peru.
Broker views on Newmont vary, with UBS having downgraded the stock to 'Neutral' from a 'Buy', while Macquarie maintains an 'Outperform' rating with a price target of $82.
Analyst picks for gold stocks
MPC Markets’ analyst Jonathan Tacadena, known for his long-term bullish stance on gold, favours these mid-size to smaller companies:
- Pantoro (ASX: PNR)
- Catalyst Metals (ASX: CYL)
- Northern Star (ASX: NST)
- DeGrey Mining (ASX: DEG)
Newmont daily chart
Woodside Energy
Morgans’ analysts highlight Woodside (ASX:WPL) as the top ASX 200 stock in the energy sector, followed by:
Morgans has an 'Add' rating on Woodside with a price target of $33, suggesting a 30% potential upside. According to Refinitiv Data, the average target price for Woodside is $30.59, with most brokers recommending a 'Hold.'
Woodside Energy daily chart
Woodside Energy stock performance and analyst ratings
GrainCorp
GrainCorp (ASX:GNC) shares are up 11% year-to-date but have remained flat over the past 12 months. ASX Tradewatch data confirms a downtrend, with the 5-day moving average below both the 20-day and 50-day averages.
Robert Spurway, CEO and Managing Director, noted, “That’s well ahead of the timing that we’d expect in previous years, and is reflective of those very strong forecasts from ABS and the good growing conditions in northern Australia. That certainly sets the potential for a strong year ahead. And GrainCorp having that volume creates opportunities not just for GrainCorp but for growers as well.”
GrainCorp's FY24 profit slumped by 75% to $62 million, leading to a trimmed special dividend. The latest harvest update reports “excellent” commodity quality, with an intake nearing 8.5 million tonnes.
Broker ratings
- Refinitiv Data indicates an average price target of $9.65, suggesting a 21% upside, with most brokers rating it a 'Buy'
- Ord Minnett has issued a “Buy” rating with a $9.80 price target
- UBS also maintains a “Buy” rating with a $9.60 price target.
GrainCorp daily chart
GrainCorp stock performance and analyst ratings
DroneShield
Shares in DroneShield (ASX: DRO), an AI-based protection platform provider, have surged over 125% in the past 12 months.
Broker views
- Bell Potter maintains a positive outlook on the stock, with a price target of $1.20
- Shaw & Partners remains positive but cautious, having lowered the price target to $1.20 from $1.30 due to high risk.
The price targets suggest a 60% upside. Bell Potter analysts describe the current valuation as an attractive entry point for investors.
DroneShield daily chart
Analyst recommendations and stock performance
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Speculate on commodities
Trade commodity futures, as well as 27 commodity markets with no fixed expiries.1
- Wide range of popular and niche metals, energies and softs
- Spreads from 0.3 pts on Spot Gold, 2 pts on Spot Silver and 2.8 pts on Oil
- View continuous charting, backdated for up to five years
1In the case of all DFBs, there is a fixed expiry at some point in the future.
Put learning into action
Try out what you’ve learned in this commodities strategy article in your demo account.
Ready to trade commodities?
Put the lessons in this article to use in a live account – upgrading is quick and easy.
- Deal on our wide range of major and niche commodities
- Protect your capital with risk management tools
- Get some of the best spreads on the market – trade Spot Gold from 0.3 points
Inspired to trade?
Put what you’ve learned in this article into practice. Log in to your account now.
Live prices on most popular markets
- Forex
- Shares
- Indices
