Daily market review
Faster US growth and expensive oil keep interest-rate pressure alive
Friday’s data showed faster growth in the United States, the euro area and Japan, but bond yields and oil-supply risks leave little room for an easy fall in interest rates. Investors need to separate companies whose revenue benefits from growth from those whose profits are squeezed by higher financing and energy costs.
This week’s central question
Could faster growth keep interest rates elevated for longer?
Opening thesis for the week. US business activity accelerated and the 10-year Treasury yield ended Friday at 4.74%. This supports company revenue but reduces the Federal Reserve’s need to ease policy quickly. A further slowdown in selling-price inflation and clear evidence that oil-supply risk is receding would weaken the thesis.
Weakens the thesis: selling-price pressure eased in US and euro-area business surveys
Next answers: US inflation, Nvidia’s results and central-bank communication
Market pulse
A snapshot based on Friday’s close and early Monday trading. Values can change during the day.
S&P 500 index of large US companies
7,674.37
The index rose 0.43% on Friday but declined by about 1.4% over the full week.
US 10-year government bond yield
4.74%
The yield rose by 5 basis points from Thursday’s 4.69% level.
Brent crude oil futures
about $93.45
Early on Monday, the price was roughly 1% below Friday’s close.
Euro-area composite business activity indicator
52.1
A reading above 50 signals expansion, although growth remained uneven among the largest economies.
European Central Bank euro reference rate on Friday
€1 = $1.1699
The euro strengthened by about 1.14% over the week, reducing unhedged US returns when translated into euros.
01 US economy and interest rates
US business activity accelerated, but a 4.74% bond yield limits the equity-market relief
Facts
The US composite Purchasing Managers’ Index (PMI) rose to 56.0 in August from 54.5. The survey tracks changes in private-sector business activity: a reading above 50 normally indicates expansion, while a reading below 50 indicates contraction. S&P Global’s historical comparison with the economy pointed to an annualised third-quarter growth rate approaching 3.0%, compared with 1.5% in the second quarter. Employment among surveyed companies grew at its fastest pace since January 2025. On the same Friday, the US 10-year Treasury yield rose from 4.69% to 4.74%, while the 30-year yield stood at 5.27%. The S&P 500 equity index gained 0.43% on Friday but still declined by about 1.4% over the week.
Why it matters
Stronger activity improves the revenue and profit backdrop, but it also reduces the Federal Reserve’s need to cut its policy rate quickly. The July meeting minutes reinforced this tension: the target range was kept at 3.50–3.75%, while three of the twelve voting members preferred a 0.25 percentage point increase. A higher long-term yield makes mortgages, corporate bonds and project financing more expensive, so stronger growth alone is not enough to lift every part of the equity market.
Portfolio impact
Faster growth can support revenue and loan demand for cyclical industrial, consumer and financial companies. The other side is pressure on long-duration US bonds, property companies and richly valued technology shares, because future profits are worth less when yields rise. Stronger US data can support the dollar, although the euro had strengthened to 1.1699 dollars by Friday. For a Lithuanian investor, the exchange rate can either magnify or reduce US asset returns in euros.
Opportunity and risk
The opportunity is growth without a renewed jump in inflation, as the survey showed slower selling-price inflation. That combination could ultimately support both earnings and bonds. The main risk is that resilient demand and expensive energy accelerate inflation again and prompt another rate increase. The next checks are the US price, income and spending data on 26 August and central-bank communication from the Jackson Hole symposium on 27–29 August.
02 Energy and geopolitics
Oil eased on Monday, but constrained Strait of Hormuz flows still support inflation risk
Facts
Brent crude futures traded at about $93.45 per barrel early on Monday, roughly 1% below Friday’s close. This is a point-in-time value, not the day’s closing price. The International Energy Agency forecast a global oil-market deficit of 1.8 million barrels per day in the third quarter. Its previous report had estimated about 0.8 million, so the forecast deficit more than doubled. Observed global inventories fell by 69 million barrels in July, an average decline of 2.2 million barrels per day. The US Energy Information Administration estimated that 4.9 million barrels per day passed through the Strait of Hormuz in the second quarter, compared with 21.6 million in the fourth quarter of 2025. That was a decline of 16.7 million barrels per day, or about 77%.
Why it matters
Monday’s lower price points to profit-taking and hopes that political decisions could improve supply. Yet physical-flow and inventory data show that the market’s buffer against another disruption has shrunk. More expensive oil raises the cost of fuel, transport, chemicals and some food production. If companies pass these costs to customers, inflation takes longer to fall and central banks have less room to reduce interest rates.
Portfolio impact
A higher oil price can support energy producers’ revenue and cash flow, but squeeze margins for airlines, hauliers, chemicals and energy-intensive manufacturers. It also weighs on long-duration bonds and highly valued growth shares if investors expect interest rates to remain elevated. Oil is priced in US dollars, so a stronger euro can soften part of the cost increase for euro-area buyers, while a weaker euro would amplify it.
Opportunity and risk
The opportunity is a durable reopening of shipping through the Strait of Hormuz, which would reduce the supply premium, transport costs and inflation pressure. The main risk is a new disruption to exports or tanker traffic when inventories are already depleted. Markets await official details of new US sanctions on Iran on Monday, but their content remains a scenario until publication. Actual shipping flows, not political headlines alone, will be the next decisive signal.
03 Europe and the economic cycle
Euro-area activity expanded, but German manufacturing and French weakness reveal an uneven recovery
Facts
The euro-area composite Purchasing Managers’ Index (PMI) rose to 52.1 in August from 52.0. A reading above 50 normally indicates expansion, while the change from the previous month shows whether momentum is strengthening. S&P Global’s historical comparison pointed to about 0.3% gross domestic product growth in the third quarter. Manufacturing expanded at its fastest pace in four and a half years. German factory output grew at its fastest pace since January 2022, but its services activity contracted for a fifth month and French output declined throughout the year. Euro-area companies increased employment for the first time this year. Official July inflation rose to 2.9% from 2.8%; Lithuania’s 5.4% rate was the second highest published European Union reading after Romania.
Why it matters
Expansion reduces the risk of an imminent recession, but the improvement is not evenly distributed. Demand for equipment, defence products and artificial-intelligence-related goods supported German manufacturing, while weak services in Germany and France point to cautious domestic consumers. Companies reported slower selling-price pressure, but inflation at 2.9% remains above the European Central Bank’s target. Better growth therefore reduces the need for urgent rate cuts, while inflation means the risk of another increase cannot be dismissed completely.
Portfolio impact
Stronger orders can support revenue for European industrial, defence-equipment, automation and technology suppliers. Services, discretionary consumption and companies exposed to French domestic demand remain more vulnerable. The signal for euro-area bonds is mixed: slower company price increases help, but growth and 2.9% inflation limit the likelihood of a rapid decline in yields. For Lithuanian investors, local inflation of 5.4% shows that the euro-area average does not capture the full pressure on purchasing power at home.
Opportunity and risk
The opportunity is a broader German manufacturing recovery that spreads into services and other euro-area economies. The main risk is that precautionary inventory building caused by Middle East supply disruptions temporarily flattered factory data and orders weaken later. The next check is Germany’s ifo business climate index on 25 August, which will show whether corporate expectations confirm Friday’s manufacturing signal.
What this could mean for your portfolio
Do today’s market moves change anything in your portfolio?
In a consultation, we will review how your investments would respond to changes in interest rates, currencies and a single sector. We will separate what deserves a check now from what does not justify changing a long-term plan.
04 Japan, the yen and interest rates
Japan’s activity rose to 53.4 as price pressure increased the risk of higher interest rates
Facts
Japan’s composite Purchasing Managers’ Index (PMI) rose to 53.4 in August. A reading above 50 indicates expansion. This was the highest level since February and the second highest since May 2023. S&P Global’s historical comparison pointed to roughly 0.8% economic growth in the third quarter, about twice the pace signalled by the survey in the second quarter. Manufacturing grew at close to its fastest pace since 2014 over the past two months, while export orders rose at their fastest rate since January 2018. Consumer prices excluding fresh food increased by 1.8% in July from a year earlier, compared with 1.6% in June. At the end of July, the Bank of Japan kept its overnight interest-rate target at 1.0%, while one member preferred 1.25%.
Why it matters
Stronger manufacturing and domestic demand reduce the Bank of Japan’s concern that a rate increase would stop the economy. At the same time, companies’ selling-price inflation remained near the survey record, giving policymakers more reason to consider tighter policy. A weak yen helped merchandise exports but made imported energy and materials more expensive. The chain is clear: a weaker currency improves exporters’ competitiveness and raises import costs, while higher inflation increases the risk of a rate rise.
Portfolio impact
Higher interest rates can improve lending margins for Japanese banks, provided loan losses do not rise at the same time. A greater probability of a rate increase is negative for Japanese government bond prices. A stronger yen would reduce the domestic-currency value of exporters’ overseas earnings, but lower imported energy costs for consumers and importers. A Lithuanian investor’s return from Japanese funds depends on both asset prices and the yen’s exchange rate against the euro.
Opportunity and risk
The opportunity is that stronger technology and equipment orders lift manufacturers’ revenue faster than their costs. The main risk is the reverse: oil and a weak yen raise import prices, reducing household purchasing power and company margins. The next signals will be the yen’s response to global bond yields, further Japanese inflation data and Bank of Japan comments on whether the 1.0% policy rate remains appropriate.
05 Lithuania and energy infrastructure
EPSO-G’s profit and investment rose, but network expansion will require more long-term financing
Facts
EPSO-G, Lithuania’s electricity and gas transmission group, reported that first-half adjusted earnings before interest, tax, depreciation and amortisation rose by almost 9%, from €40.5 million to €44.1 million. Adjusted net profit increased by almost 37%, from €17.7 million to €24.4 million. Investment reached €99.6 million, nearly 20% more than a year earlier. That was about 2.3 times first-half adjusted operating earnings before depreciation, so investment substantially exceeded the earnings generated during the period. Renewable-energy capacity connected to transmission and distribution networks rose from 4.6 to 6.4 gigawatts, or about 39%. Domestic generation met 78% of electricity demand, while renewables accounted for 59%.
Why it matters
More connected renewable capacity reduces reliance on electricity imports, but new projects require transmission lines, storage and system-balancing services. When €99.6 million of investment is more than twice adjusted operating earnings before depreciation, accumulated cash, debt or other sources must cover the difference. Profit growth and network regulation therefore directly affect how cheaply the group can borrow and how much investment is ultimately reflected in transmission tariffs.
Portfolio impact
This is primarily a Lithuanian infrastructure and bond story, not a broad Baltic equity-index event, because EPSO-G’s shares are not exchange traded. Bondholders need to assess cash flow, debt growth, interest costs and state ownership. Grid expansion can benefit renewable-project developers, contractors and equipment suppliers if connection times fall. The other side is a larger financing need and possible balancing costs that can affect energy companies and consumers.
Opportunity and risk
The opportunity is that greater domestic generation and stronger networks reduce import and supply-disruption risks over time. The main risk is excessively rapid growth in investment and debt if regulated revenue or project execution is delayed. The next local signal is the yield and demand at Lithuania’s government bond auction on 24 August. The auction had not taken place by 07:00, so no result is presented as fact and it will be checked at the 12:00 review.
Today’s portfolio compass
Growth supports revenue, but interest rates and energy test the quality of profits
Faster business activity in the United States, the euro area and Japan is the main force at the start of the week. It supports the revenue outlook for industrial, banking and cyclical companies. The main counterforce is the high US bond yield and still-disrupted oil flows through the Strait of Hormuz. These two forces raise the cost of housing, corporate debt, transport and manufacturing, while putting pressure on long-duration bonds and richly valued technology shares. EPSO-G’s results show the same conflict in Lithuania: network expansion creates long-term value but currently requires investment of more than twice first-half adjusted operating earnings before depreciation. Slower selling-price inflation in the US and euro-area surveys is the counterweight. If it persists, stronger growth does not have to produce another inflation surge. Investors should assess not only sales growth but also debt maturities, energy costs, margins and the exchange-rate effect on euro returns.
Important. This is general market commentary, not personalised investment advice. Market, currency and company data can change, and investments can fall in value.
