Daily Commentary

MarketMinder’s View: “Seven members of the broader group called OPEC+ said Sunday they will raise output by about 188,000 barrels a day in September, a sixth straight monthly increase. The participating countries include Saudi Arabia—the group’s de facto leader—along with Russia, Iraq, Kuwait, Algeria, Kazakhstan and Oman.” In a vacuum, this may sound like positive news for global oil supply and thus prices, which rose throughout much of July. Yet the OPEC+ cartel’s production targets aren’t as influential as many think—and not just for the war-related reason provided herein. In reality, OPEC’s influence on global supply has waned significantly over the past decade-plus due to the US’s shale boom. Two, OPEC participants have consistently missed their production targets tied to weak enforcement and various local constraints. Before the war, the cartel consistently overshot its targets. Since the war broke out, as the article notes, several states have undershot. So while OPEC may be “planning” to add to global supply, it doesn’t mean they will. Ultimately, though, markets are looking at the global supply and demand landscape over the next 3 – 30 months, which has little to do with production targets from a handful of producers.

MarketMinder’s View: Some more positive news for America’s factory sector, as the Institute for Supply Management’s July manufacturing purchasing managers’ index (PMI) rose to 55.6 from June’s 53.3, marking its highest reading since May 2022 (50.0 marks the line between expansion and contraction). The report was broadly strong as all but one industry (chemical products) showed growth, and the forward-looking new orders subindex ticked up from 56.0 to 56.7—a positive sign for future production. Export orders notably improved, jumping from June’s contractionary 48.5 to 53.0. Note this broad improvement happened despite raw materials prices still rising swiftly (easing just slightly from 73.0 to 71.1), illustrating demand’s resilience in the face of higher costs. Now, it is worth noting PMIs measure only growth’s breadth, not its magnitude, and their backward-looking nature renders them largely moot for stocks’ direction ahead. This reading also contrasts somewhat with S&P Global’s manufacturing PMI, which matched June’s three-month low at 53.9 and showed softer new orders growth and declining international sales. But both surveys showed continuing factory growth in July, defying pundits’ worries at the war’s outset.

MarketMinder’s View: This piece highlights a new forecast projecting the UK economy will lapse into recession if the Iran War drags on, keeping energy prices high. We could quibble with the specifics but will lay off, because that isn’t really the point—forecasts are always just opinions, based on assumptions and bias. We are more concerned with what this says about broader sentiment, as the consultancy here isn’t alone in projecting a UK recession due to higher energy prices. There seems to be a sense that just because UK GDP has grown during the war thus far doesn’t mean it has avoided trouble—the pain, analysts argue, is merely delayed. Contrast that with economic sentiment toward the US, which seems over recession fears, even as it wrongly sees AI and Tech as the only things driving the train. Expectations remain lower abroad—in Europe and Japan as well as the UK—adding bricks to the wall of worry and creating an easy bar for reality to clear. The UK needn’t have some massive economic acceleration in order to deliver stocks bullish positive surprise. With recession expectations widespread, simply plodding along as it has would likely do the trick.