Daily Market Review
Technology sell-off spread to Asia as oil rose again
The sell-off in highly valued technology stocks spread from the United States to Asia, while new European inflation data showed why pressure from high interest rates may not fade quickly. The technology-heavy Nasdaq Composite fell 1.3% on Tuesday, South Korea’s KOSPI lost 5.80% on Wednesday and annual inflation reached 2.9% in both the United Kingdom and the euro area. Expensive energy is raising household costs and complicating rate cuts, shifting investors’ attention from revenue growth to profitability, financing costs and companies’ ability to absorb higher energy prices.
This week’s central question
Will weaker US and Chinese demand allow rates to fall if the oil-supply risk persists?
What has changed since yesterday? UK consumer-price inflation accelerated from 2.6% to 2.9%, while final euro-area data confirmed 2.9% inflation and a 10.3% annual rise in energy prices. The technology sell-off also deepened in Asia even as US housing and demand weakened. The week’s question now leans more clearly in one direction: weaker demand alone is not enough to lower interest rates while expensive energy feeds into household bills and consumer prices.
Challenges the thesis: euro-area energy prices rose 10.3% year on year, UK inflation accelerated to 2.9% and Brent remained above $91.
Will decide it: US oil inventories, the Federal Reserve’s July meeting minutes and Thursday’s European and US business-activity surveys.
Market pulse
Technology shares fell as energy pushed European inflation higher again
Figures show the latest market close, market snapshot or official release available by 12:00 Lithuanian time. Market prices may change during the day.
The index fell to 26,289.71 on Tuesday as investors cut exposure to highly valued artificial-intelligence and semiconductor stocks.
The index closed at 6,471.17 on Wednesday, led lower by memory-chip producers.
UK inflation accelerated from 2.6%, while euro-area energy prices increased 10.3% over the year.
The price was up about 0.9% as uncertainty over shipping through the Strait of Hormuz persisted.
July’s seasonally adjusted annual rate fell to 1.239 million homes even as the number of new building permits increased.
1 Equities, technology and valuations
The technology sell-off spread to Asia as high interest rates raised the profitability hurdle
Facts
The decline in technology shares became a broad market move. The Nasdaq Composite fell 1.3% on Tuesday, while the broad S&P 500 index lost 0.7% for a third consecutive session. On Wednesday, South Korea’s KOSPI closed 5.80% lower at 6,471.17 and Japan’s Nikkei 225 lost 3.16% to 65,326.42.
Why it matters
Investors do not dispute that demand for data centres is growing, but they are paying more attention to when heavy investment will become free cash flow. When safe US government bonds offer high returns, profits expected far in the future are worth less today. The most expensive growth stocks therefore react more sharply than profitable companies with modest debt.
Portfolio impact
US and Asian indices with large technology weights become more sensitive to moves in a small number of major companies. Value shares, healthcare, consumer staples and businesses with durable cash flow may find relative support. Bonds provide only limited protection while long-term yields remain high and energy costs keep the inflation risk alive.
Opportunity and risk
The opportunity would be stronger corporate evidence that technology revenue is growing faster than investment and debt. The risk is a further valuation decline if oil and interest rates stay high. The next signals are semiconductor-sector guidance, companies’ free cash flow and the direction of US Treasury yields.
2 Europe, inflation and interest rates
UK and euro-area inflation reached 2.9% as energy raised everyday costs again
Facts
UK consumer prices rose 2.9% in the year to July, up from 2.6% in June, and increased 0.3% during the month. Gas prices jumped 14.7% month on month after a change in the regulated tariff. Final euro-area inflation was also 2.9%, energy prices rose 10.3% year on year and Lithuania’s 5.4% rate was the second highest among all 27 European Union members.
Why it matters
The acceleration came mainly from energy and housing costs rather than a sudden surge in consumer demand. UK core inflation, which excludes energy and food, remained at 2.6%, while services inflation eased from 3.6% to 3.4%. Even so, higher bills reduce household purchasing power and make central banks more cautious about cutting interest rates.
Portfolio impact
Persistently high inflation pressures longer-dated UK and euro-area government-bond prices, rate-sensitive real estate and heavily indebted companies. Energy producers and businesses that can pass costs to customers may prove relatively more resilient. For a Lithuanian investor, 5.4% local inflation means domestic purchasing power is eroding faster than the euro-area average.
Opportunity and risk
The opportunity is that the regulated energy-tariff jump proves temporary and easing services inflation pulls the headline rate lower again. The risk is that oil and gas stay expensive and spread into transport and other goods. The next signals are European central-bank communications, wholesale energy prices and the August inflation releases.
3 Geopolitics, energy and bonds
Brent reached $91.83, so weaker growth data delivered almost no relief in long-term interest rates
Facts
Brent crude was up about 0.9% at $91.83 a barrel on Wednesday morning. It traded at $72.87 just before the war began, leaving the current price roughly 26% higher. On Tuesday, the 10-year US Treasury yield slipped only to 4.71%, while the 30-year yield eased to 5.28%.
Why it matters
More expensive oil raises fuel, transport and some manufacturing costs. If companies pass those costs to customers, inflation can decline more slowly and central banks cannot rush to cut interest rates. This chain explains why weaker housing data brought only a very small fall in bond yields.
Portfolio impact
A higher oil price usually supports energy producers but pressures airlines, logistics, chemicals and retailers. Long-dated bond prices remain sensitive to inflation surprises. For an investor whose portfolio is measured in euros, moves in the US dollar can either amplify or soften the effect of oil-price changes.
Opportunity and risk
The opportunity is a verified agreement that restores tanker flows through the Strait of Hormuz and reduces the oil risk premium. The main risk is a renewed supply disruption. The next signals are official communications from countries in the region and the US oil-inventory report due later today.
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4 US inflation, manufacturing and rates
Fuel lowered US import prices, but non-fuel goods became more expensive while industry continued to grow
Facts
US import prices fell 0.4% in July as imported fuel became 7.2% cheaper. Non-fuel import prices, however, increased 0.4% and were 4.5% higher than a year earlier. A separate Federal Reserve release showed that total industrial production and manufacturing output both increased 0.2% in July.
Why it matters
The headline decline looks helpful for inflation but conceals broader goods-price pressure. Growing industrial output also does not point to a sudden break in the economy. The signal for the Federal Reserve is mixed: energy prices are volatile, while underlying import costs and manufacturing do not yet support confident expectations of rapid rate cuts.
Portfolio impact
Profit margins at import-intensive retailers and manufacturers may narrow if they cannot pass higher costs to customers. Businesses with stronger pricing power are more resilient. A 0.8% increase in business-equipment production supports industrial suppliers, but underlying inflation risk still weighs on bonds and expensive growth stocks.
Opportunity and risk
The opportunity is several consecutive months of slower non-fuel import and producer-price growth. The risk is another energy increase that spreads into other goods. European inflation has now confirmed the energy pass-through risk, and the next important check is the Federal Reserve minutes due later today.
5 Housing, consumption and company results
US housing starts fell 12.4% as homebuilding and improvement companies showed pressure on volumes and margins
Facts
US housing starts fell 12.4% in July to a seasonally adjusted annual rate of 1.239 million homes, while single-family construction declined 9.9%. Permits, which signal the future project pipeline, increased 5.0%. Current activity is therefore weak, but the outlook for the next few months is not deteriorating uniformly.
Why it matters
Expensive mortgages reduce affordability and delay building and renovation decisions. Home Depot, the world’s largest home-improvement retailer, increased quarterly sales 5.7% year on year to $47.9 billion, but the number of comparable transactions declined 1.0%. Growth relied more on a higher average purchase value than on customer traffic.
Portfolio impact
Homebuilders, construction-material producers, home-improvement retailers and mortgage lenders remain sensitive to long-term interest rates. Toll Brothers delivered 10% fewer homes, but new contracts increased 5%. Demand has not collapsed, although near-term profits and margins remain under pressure.
Opportunity and risk
The opportunity is lower mortgage rates that allow the larger pool of permits to become actual construction. The risk is financing costs staying high and incentives eroding builders’ profitability. The next signals are new-home sales, mortgage rates and companies’ guidance for orders and profit margins.
Today’s portfolio compass
Energy inflation and high rates are testing technology, bonds and housing at the same time
The central point is not simply that technology shares fell, but the price-and-rate chain intensifying the move. Artificial-intelligence investment remains large, yet high bond yields force investors to demand faster profits and free cash flow. Brent crude above $91 a barrel is already reaching European consumers: UK inflation accelerated to 2.9%, while euro-area energy prices rose 10.3% year on year. A 12.4% drop in US housing starts shows weakness in a financing-sensitive sector, but a 5.0% increase in permits and continued industrial growth do not signal a broad economic break. For portfolios, this creates a clearer distinction between highly valued growth, durable cash-generating businesses, energy producers and long-dated bonds. Verified relief in oil supply, evidence that regulated energy-tariff increases are temporary or several consecutive softer underlying price readings would provide the main counterweight.
Important information. This review provides general market information and is not a personal recommendation to buy or sell any security. Investment values can rise or fall, while changes in currencies, interest rates, energy prices, company results and geopolitics can materially alter outcomes.
