Daily update
Daily update
- The Brent crude oil benchmark moved above USD90 per barrel, following reports of an extension to production cuts by Saudi Arabia and Russia. This will likely trigger angst about inflation. Oil prices in late 2022 were moving around USD80 per barrel. However, deflation forces for durable goods and disinflation forces as profit-led inflation is squeezed are still in place. If the oil price persists at current levels, it may slow disinflation rather than reignite inflation.
- Slower disinflation may worry markets focused on Federal Reserve Chair Powell’s policy gyrations. Past evidence does not inspire much confidence. However, Fed governor Wallace—a hawk—was sounding quite benign about the necessity of future rate hikes in comments overnight.
- German factory orders in July were a lot weaker than expected (of course the previous month’s data was revised, positively). This follows a drop in US factory orders. The pattern continues to support the idea of shifting consumer spending patterns.
- The US trade balance for July is not likely to be market moving, but the trade patterns of the world’s largest consumer do matter. Cyclical forces (the changing consumer spending patterns) combine with deglobalization (political interference) and localization (using automation to produce more efficiently closer to customers) to challenge trade levels.
