Daily market review
Oil moved above $90 as inflation fears weighed on stocks
Brent crude, the international oil benchmark, rose 2.7% on Monday to $90.87 a barrel. The broad S&P 500 US equity index fell 0.5%, while the ten-year US Treasury yield increased to 4.72%. Markets showed that energy-price risk currently outweighs hopes that weaker US and Chinese demand will quickly allow interest rates to fall. Results released today by BHP offered a different commodity signal: copper now generates more than half of the global mining group’s core operating earnings. On Tuesday, Japan’s Nikkei 225 fell 2.5% to 67,460.73, strengthening the morning signal that expensive energy was weighing on equities.
The week’s central question
Will weaker US and Chinese demand allow rates to fall if the oil-supply risk persists?
What changed since yesterday? Monday’s trading showed which force is currently stronger. Brent crude rose 2.7%, overshadowing evidence of weaker US consumption and Chinese domestic demand. The ten-year US Treasury yield increased to 4.72%, while the S&P 500 fell 0.5%. The same tension reached Japan on Tuesday, when the Nikkei 225 fell 2.5% to 67,460.73. A New York State manufacturing survey improved, but businesses also reported stronger price pressure. Weaker demand alone is therefore not enough: energy and supply risks must ease before expectations of lower interest rates can strengthen.
Challenges the thesis: Brent crude rose 2.7%, the ten-year US Treasury yield climbed to 4.72%, and the New York manufacturers’ prices-paid measure reached 58.6.
Will decide it: US import prices, housing starts and industrial production, followed on Wednesday by oil inventories and the Federal Reserve meeting minutes.
Market pulse
Oil rose, Japanese equities fell and copper became BHP’s main earnings engine
Figures show the latest market close or official release available by 12:00 Lithuanian time. Market prices may change during the day.
The price rose 2.7% on Monday because a final agreement on shipping through the Strait of Hormuz had not been confirmed.
The broad equity index fell to 7,745.06 on Monday as more expensive oil revived concerns about inflation.
The annual return demanded by investors increased by 0.04 percentage point in one trading day.
Annual revenue grew 15%, while copper generated 54% of core earnings before interest, tax, depreciation and amortisation.
The index closed at 67,460.73 on Tuesday as expensive oil and inflation risk increased pressure on equities.
1 Geopolitics, oil and interest rates
Brent crude rose 2.7%, pushing stocks lower and government-bond yields higher
Facts
Brent crude rose 2.7% on Monday to $90.87 a barrel. The S&P 500 fell 0.5%, the technology-heavy Nasdaq Composite declined 0.3%, and the ten-year US Treasury yield increased from 4.68% to 4.72%. Oman and Iran are discussing safer shipping, but no final operational agreement had been officially confirmed by 07:00 Lithuanian time.
Why it matters
More expensive oil raises the cost of fuel, transport and some manufacturing. If companies pass those costs to customers, inflation may fall more slowly. Central banks then have less room to cut interest rates, while investors demand higher returns from government bonds. That also makes highly valued equities less attractive.
Portfolio impact
A higher oil price generally supports energy producers, but squeezes the profits of airlines, logistics companies, chemical manufacturers and other fuel-intensive businesses. Longer-dated bond prices can fall when their yields rise. For euro-based investors, movements in the dollar may amplify or soften the change in the oil price.
Opportunity and risk
The opportunity is a confirmed shipping agreement and rising oil flows, which would ease price pressure. The main risk is renewed escalation or a longer disruption to supply. The next signals will be official communication from Oman and Iran and Wednesday’s US oil-inventory report.
2 Mining, copper and global investment
BHP increased revenue by 15%, while copper generated more than half of core earnings for the first time
Facts
Global mining group BHP increased annual revenue by 15% to $58.8 billion. Core earnings before interest, tax, depreciation and amortisation rose 27% to $32.9 billion. Copper generated $18.2 billion of that total, or 54% of group earnings, while free cash flow increased 83% to $9.8 billion.
Why it matters
Copper is essential for electricity grids, renewable energy, electric vehicles and data centres. BHP’s realised copper price rose 35% over the year, lifting the copper business margin to 70%. That confirms strong long-term electrification demand, even as China’s latest construction and investment data point to weaker near-term commodity demand.
Portfolio impact
The results support the outlook for copper miners, mining-equipment suppliers and companies expanding electricity networks. BHP reduced net debt from $12.9 billion to $8.7 billion and declared a final dividend of $0.99 a share, so the story also matters for dividend equities. The Australian dollar and metal prices can alter the return for euro-based investors.
Opportunity and risk
The opportunity is BHP’s plan to increase copper production by roughly 40% by the 2035 financial year. The nearer-term risk is that its 2027 guidance of 1.65–1.80 million tonnes is below this year’s 1.953 million tonnes, while weaker Chinese demand could reduce the copper price. Copper inventories, Chinese credit and project costs are the next important signals.
3 China, global demand and commodities
Chinese investment fell 6.7%, leaving a divided outlook for global commodity demand
Facts
Data released on Monday showed that Chinese industrial output grew 4.5% from a year earlier in July, down from 5.3% in June. Retail-sales growth slowed from 1.0% to 0.6%. Fixed-asset investment fell 6.7% over January to July, private investment declined 9.4%, and property-development investment dropped 19.2%.
Why it matters
Simultaneous slowdowns in consumption, industry and investment show broad weakness in domestic demand. That can reduce demand for metals, energy and European manufactured goods. A weaker Chinese economy may restrain part of global inflation, but it also leaves companies that sell heavily into China with less scope for revenue growth.
Portfolio impact
The data create risks for iron ore, industrial metals, European carmakers, luxury companies and machinery producers. Lower global price pressure could help government bonds. Copper investors face a clear tension: Chinese demand is weak today, while investment in electricity grids and data centres sustains the longer-term requirement for the metal.
Opportunity and risk
The opportunity is 16.9% annual growth in high-technology manufacturing and the prospect of further economic support. The main risk is a continuing decline in housing and private investment that reaches foreign suppliers. China’s credit, home-sales and business-activity data will be the next signals.
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4 The US economy and the path of rates
US consumption and housing weakened, but manufacturing activity and price pressure strengthened
Facts
US retail sales fell 0.6% in July but remained 5.0% higher than a year earlier. The Housing Market Index, a survey of US homebuilders, stood at 35 in August. A reading below 50 means more builders view conditions as poor than good; 35% cut prices and 63% offered incentives to buyers.
Why it matters
Weaker consumption and housing support the case for lower interest rates, but manufacturing sent a different signal. The Empire State Manufacturing Survey, which measures conditions in New York State, rose to 20.6; a reading above zero indicates improvement. Its prices-paid measure reached 58.6, showing that price pressure has not disappeared.
Portfolio impact
Weaker demand may reduce sales for homebuilders and retailers and force them to offer discounts. Slower consumption can support shorter-dated bonds, but inflation risk weighs on longer-dated bonds and highly valued growth stocks. An improvement in manufacturing activity could help industrial and transport companies.
Opportunity and risk
The opportunity is an orderly slowdown in demand without a wave of job losses, allowing interest rates to fall. The risk is a weaker consumer combined with more expensive energy and rising producer prices. US import prices, housing starts and industrial production will refine the picture today, followed by the Federal Reserve minutes on Wednesday.
5 Japan, the yen and the central bank
The Nikkei 225 fell 2.5%, while 0.3% economic growth failed to hide weak domestic demand
Facts
The Nikkei 225 closed at 67,460.73 on Tuesday and fell 2.5% during the session. Japan’s economy grew 0.3% in the second quarter, equivalent to a 1.1% annualised rate. Private consumption was nearly unchanged, business investment fell 1.2%, exports rose 0.5%, and imports declined 1.5%. Net trade added 0.5 percentage point to quarterly growth, so domestic private demand was weaker than the headline suggests.
Why it matters
The sharp equity decline showed that positive gross domestic product growth did not offset expensive energy and weak domestic demand. Lower imports lift the economy mathematically, but do not show stronger household spending. At the same time, Japanese producer prices rose 7.2% from a year earlier in July, while yen-denominated import prices increased 29.1%. The Bank of Japan therefore faces weak private demand alongside intense pressure from imported costs.
Portfolio impact
Broad Japanese equity exposure came under pressure in the short term. A weaker yen and rising exports help Japanese exporters, but more expensive energy and raw materials reduce importers’ earnings. Higher interest rates may benefit banks and hurt longer-dated Japanese government bonds. A weaker yen can reduce the euro return earned by an unhedged European investor.
Opportunity and risk
The opportunity is an equity recovery if oil becomes cheaper and stronger exports eventually support wages and consumption. The main risk is that imported costs rise while household income and demand fail to keep pace. Japan’s consumer-price data, the yen and central-bank communication will provide the next evidence.
Today’s portfolio compass
Oil raises the inflation risk, while copper shows where long-term demand remains strong
Monday’s market reaction was clear: a 2.7% rise in Brent crude outweighed hopes that weaker US and Chinese demand would soon allow interest rates to fall. US equities declined and the ten-year Treasury yield climbed to 4.72%. BHP’s results provide an important counterweight. Copper now generates 54% of the group’s core earnings before interest, tax, depreciation and amortisation, confirming genuine demand from electricity grids, data centres and electrification. Yet a 6.7% decline in Chinese investment warns that near-term commodity demand may remain weak. Slower US consumption and housing support the lower-rate scenario, but oil and manufacturers’ price pressure work against it. In Japan, trade arithmetic supported headline growth, but the 2.5% fall in the Nikkei 225 showed that investors still see risks from weak private demand and imported inflation. For portfolios, the lesson is not one large directional bet, but a clear distinction between profitable commodity producers, energy-sensitive sectors and longer-dated bonds.
Important information. This review provides general market information and is not a personal recommendation to buy or sell any security. Investments can rise or fall in value, while movements in currencies, interest rates, energy and metal prices, and geopolitics may materially change outcomes.
