Market Highlights: Oil, gold prices surge, AUD tumbles below US63c, and 5 ASX small caps to watch

Aussie shares to fall on Monday as war in Israel intensifies
Airlines led the losses in Europe, however oil and gold prices surge
Almundi breaks down what the war would mean for the markets

Aussie shares are poised to fall again after a selloff in global markets. At 8am AEST, the ASX 200 index futures was pointing down by -0.4%.

In New York, the S&P 500 fell by -0.5%, the blue chips Dow Jones index was up by +0.12%, and the tech-heavy Nasdaq tumbled by -1.23%.

Traders were nervous about the deteriorating situation in Israel, as well as the US consumer sentiment data which has fallen sharply in October. These concerns have overshadowed the rally in US banks like JP Morgan and Chase, which beat estimates in their quarterly profits.

JPMorgan CEO Dimon said: “Currently, US consumers and businesses generally remain healthy, although, consumers are spending down their excess cash buffer.”

However, Dimon warned that “this may be the most dangerous time the world has seen in decades”.

Another stock to have surged include Dollar General, which jumped 9% after tapping former CEO Todd Vasos to take back the reins.

In Europe, airlines and travel stocks led the losses as worries about escalating violence in Gaza sent oil prices jumping, with Brent up 6% to US$90.89 a barrel.

Looking ahead, this will be a busy week on the data front – from RBA and US Fed speeches, to key Chinese economic data, and the the Energy Intelligence Forum 2023.

How the war in Israel would affect the market

According to Amundi, Europe’s largest asset manager, in the short term the Israel-Hamas conflict will likely last several weeks, with the hostage situation complicating Israel’s response, and the US will most likely be involved.

Head of Geopolitics at the Amundi Investment Institute, Anna Rosenberg, says the impact on markets should be limited, as long as the conflict remains local and does not spread.

“It is marginally positive for the defence and the oil sectors, but slightly negative for some others such as aviation and long-haul travel, given the complications to travel to Israel and flying over the region,” she said.

According to Rosenberg, the biggest risk of this war is to oil prices, and thinks the ongoing relaxation of US sanctions on Iranian oil sales will become harder.

“At the same time, once the immediate conflict is under control, Israel could decide that now is the time to attack Iran’s nuclear capabilities – with the possibility of a larger regional conflict erupting – and this could lead to higher oil prices,” she added.

This conflict has therefore added uncertainty to the inflation path, which is key to assess the economic outlook for the US.

“If inflation falls as expected, the Fed will be accommodative, but if inflation doesn’t come under control, the Fed is unlikely to cut rates and this will increase the risk of a hard landing for the US economy in 2024,” said Rosenberg.

In other markets …

Gold price spiked up +3.4% to US$1,932.50 an ounce.

10-year US bond yield surged another 8bp, as higher oil prices raised concerns of a rebound in inflation.

Iron ore futures rallied by +1% to US$118.57 a tonne.

Base metals prices were weaker with nickel futures surging by +2%, but copper futures slipped by -0.4%.

The Aussie dollar lost another -0.2% and fell below US63c to US62.99.

Bitcoin meanwhile rose +1.2% in the last 24 hours to US$27,204.

5 ASX small caps to watch today

Norwood Systems (ASX:NOR)
Norwood has signed a Group Master Supply Agreement (GMSA) with Singapore Telecommunications (Singtel), and is slated to commence proof of concept (POC) work of Norwood’s CogVoice Voicemail platform with Optus in Australia. The GMSA creates a contractual framework under which Norwood can enter into agreements for future projects, with the Singtel Group companies including Optus.

LCL Resources (ASX:LCL)
LCL has received the critical Environmental Licence for the Miraflores gold deposit, part of the company’s 2.6Moz Quinchia Gold Project in Colombia. The environmental permitting speaks to strong political and social support for development of the project, and greatly enhances the value of the project, says LCL. LCL has also noted the improving sentiment for investments in the Colombian mining industry.

Okapi Resources (ASX:OKR)
Okapi has expanded its land position on its 100%-owned Maybell Uranium Project in Moffatt County, Colorado. A total of 69 additional claims were staked on recently recognised mineralisation where Okapi did not hold the mineral rights and to also fill important gaps in the existing land package. The new claims cover 384ha, and increase the company’s land position to 520 claims with a total area of 4,145ha.

Pioneer Lithium (ASX:PLN)
PLN reported further significant progress from the recently commenced maiden exploration program at the company’s 90%-owned Root Lake Lithium Project in Ontario, Canada, with the discovery of a significant swarm of 85 new pegmatites within the Central Corridor. PLN says this is a significant breakthrough in its maiden exploration program.

Metals Australia (ASX:MLS)
More than 50% graphitic carbon (Cg) has been achieved from an extensive graphite sampling program at the Lac Rainy Graphite Project in Quebec, which also produced several results of over 20% Cg and an average result of over 11% Cg. MLS says these results highlight potential for one of the world’s most significant high-grade graphite projects, ideally located to supply battery grade graphite to North American markets.

At Stockhead we tell it like it is. While Pioneer Lithium is a Stockhead advertiser, it did not sponsor this article.