Oil on the rise despite OPEC production hike

European markets are largely kicking off affairs on a downbeat tone, following their Asian counterparts lower. The weekend announcement from Donald Trump that he plans to double tariffs on steel and aluminium imports does serve to push back on any hopes that he will change course in the face of the recent court ruling. Meanwhile, the weakness we have seen in Chinese markets overnight highlight the fading hopes of a trade deal between the world’s two largest economies, with the Trump administration claiming that China have continued to hold back rare earth exports despite the agreement reached in Geneva. While the Chinese commerce ministry insist that they have upheld their part of the agreement, there is a fear that relations are deteriorating rather than improving.

Oil prices are on the rise this morning, with Brent crude gaining over 3% since Friday’s close. Notably this comes despite an OPEC decision to raise production by another 411k bpd for July. To some extent this could signal that markets have reached a bottom and are looking ahead with greater optimism around the demand picture. Part of that comes from the direction of travel for Chinese growth, with the weekend manufacturing PMI releases seeing a welcome rebound back to 49.5 (from 49.0).

Looking ahead, this week will be dominated by central banks and jobs data, with last week’s Nvidia earnings largely meaning that Q1 earnings season is behind us. With around 5 weeks left until we see the reciprocal tariffs kick back in, Trumps team will be keen to start pushing trade deals across the line. Nonetheless, markets will instead be focused on the implications of Trumps policies, with any signs of deterioration in the jobs market providing a potential incentive for the Fed to take a more proactive approach to easing given last week’s cool PCE inflation release.