Daily Commentary

MarketMinder’s View: As the conflict with Iran enters its second week, this rundown provides a helpful lay of the land of the latest: Fighting has disrupted commerce not just in the Middle East but also in Asia and Europe while investors also feel the sting. While we don’t dismiss those effects, it is also critical for global investors to scale the conflict’s effects. Take the potential energy fallout highlighted here: “Economies such as Italy, Belgium, China, India and South Korea, which are the most dependent on oil and gas shipments through the Strait of Hormuz, are feeling some of the worst effects. In February, inflation in the euro zone came in hotter than expected, and war-related energy bills are likely to make it worse. With QatarEnergy’s liquefied natural gas production shut down following Iranian attacks, European and Asian customers could be forced into a ‘bidding war’ for available gas supplies, said TS Lombard in London.” A bidding war means countries have to pay more for gas—but it doesn’t mean actual gas shortages. Likewise, while one industry agency reports 57 container ships are stuck in the Strait of Hormuz, “The immediate impact of that backlog is modest. The thousands of shipping containers they carry represent less than 1 percent of global capacity.” Other vessels are either loitering or going to other ports, which can potentially cause delay, though that isn’t a given, either. Nobody can predict when the fighting will end, but as this article conveys, many industries are worried a prolonged war will knock growth worldwide. That signals expectations are low—setting the stage for markets to exceed them as worst-case scenarios don’t materialize. Volatility may continue, but markets generally move on faster than most expect. For more, see last week’s commentary, “February’s Growthy data—and the Iran War’s Souring Sentiment.”

MarketMinder’s View: German heavy industry started 2026 on a lousy note as January industrial production slipped -0.5% m/m while manufacturing new orders fell -11.0%, with both missing analysts’ expectations and the former ending a four-month growth streak. The article worries January’s pullback reflects the petering out of government spending and investment, implying industrial production will remain weak without Berlin’s help—especially if higher energy prices tied to the conflict in Iran persist, thereby weighing on Germany’s energy-intensive industries. Perhaps, but that reads a lot into one month of data, which isn’t even as poor as the headline reading suggests (excluding more volatile large scale orders, industrial orders fell -0.4% m/m in January). We agree government investment takes time to roll out, which is why we caution investors against anticipating a big output boost—not that Germany needs it, given its private sector (and services in particular) drive the country’s growth. For stocks, though, this is all ancient news, which they have long since priced in. More recent (though still backward-looking) data show German manufacturing returned to growth mode in February—a reminder to review a swath of data when assessing economic conditions and how they align with reality.

MarketMinder’s View: Despite the dour title, some of the UK economic data discussed here actually point positively. First, the negatives: Yes, the two monthly employment measures featured here weakened. “A monthly employment index from BDO, an accountancy and consultancy firm, is running at its weakest level in nearly 15 years. It has had its worst reading since March 2011, when the jobs market was still recovering from the financial crash.” The other (from KPMG and the Recruitment and Employment Confederation) indicated demand for workers weakened in February, though there were some signs of stabilization. These datasets are consistent with the Office for National Statistics’ data and Office for Budget Responsibility’s report, which found businesses were holding back on hiring rather than laying off folks. So, Britain’s labor market isn’t gangbusters by any means, which tracks with other ok macroeconomic data. Interestingly, though, BDO also reported its business output index hit its highest level in a year, thanks to a “more buoyant services sector.” Yet that positive gets excused away with fretting over a “floundering labour market” (which lags growth) and global headwinds (e.g., the Middle East conflict). That is a lot of pessimism overshadowing some nicely positive data—yet another sign sentiment toward the UK is in the doldrums, teeing up positive surprise. A bullish sign for an economy that is in much better shape than many appreciate.