Jefferies raised price forecasts across key commodities, including copper, gold, and rare earths, citing improving fundamentals and potential macroeconomic stimulus, while highlighting selective opportunities amid elevated volatility, it said in a Monday note.

The firm's top sector picks include Northern Star Resources (ASX:NST), Capstone Copper (ASX:CSC), South32 (ASX:S32), Alcoa (ASX:AAI), and Paladin Energy (ASX:PDN), highlighting idiosyncratic value across their coverage despite crowded quality exposures.

Jefferies shared that despite mixed manufacturing signals and softening US data, improving global growth and expectations of Fed rate cuts, combined with China's targeted stimulus, suggest a potentially constructive environment for commodities, though near-term volatility risks remain elevated.

The investment firm said it remains most constructive on gold and copper, selectively positive on aluminum, uranium, met coal, and lithium, and neutral-to-negative on iron ore, nickel, and thermal coal due to supply and demand dynamics.

Jefferies prefers Northern Star Resources, with a buy rating and price target of AU$28, citing its strong exposure to a higher gold outlook and improving operational momentum.

The firm also favors Capstone Copper with a buy rating and price target of CA$15, highlighting its low-capex copper growth and strong pre-Santo Domingo free cash flow.

The firm sees South32, upgraded to buy from hold with a price target of AU$3.20, and Alcoa, rated buy with a price target of $42, as key aluminum recovery plays, with improving earnings momentum as the market rebalances.

The firm favors Paladin Energy with a buy rating and price target of AU$10, citing a tightening uranium cycle and strong operational performance.