Year · Market review
Year: tracing trade and interest rates through to profit
Across twelve rolling months, the direction of interest rates, the legal basis for tariffs and the reliability of energy supply all changed. Technology demand generated large supplier revenues while increasing customers’ investment needs. A new stage in US–China talks and slower Chinese industrial profit growth add to the year-end assessment. The broader lesson remains that an agreement, a lower bill and an investor’s return are different things.
Period covered: 2025-09-29 – 2026-09-28Information as of 18 min read
Two important developments have emerged since the 25 September edition: the White House published US and Chinese product lists for proposed trade relief on 27 September, and slower August industrial profit growth in China was reported on 28 September. Friday’s US ten-year yield was 5.17%, slightly below Thursday but well above 22 September. Trade hopes therefore do not remove the need to examine costs and demand.
An announced plan, its implementation and a company’s actual earnings remain different things. Higher bond yields do not remove price volatility. More crude in storage does not automatically rebuild finished-fuel inventories, and higher production does not necessarily mean faster profit growth.
Year
What happened
Autumn 2025: US interest rates fell while Europe opted for a pause
Before this rolling period began, on 17 September 2025, the Federal Reserve cut its target range from 4.25–4.50% to 4.00–4.25%. That is the starting background, not an event after 29 September. It cut the range by another quarter point on both 29 October and 10 December, reaching 3.50–3.75%. Each decision took effect the following day.
Lower interest rates helped some borrowers, but their benefits cannot be separated from the reason for the cuts. If a central bank cuts rates because it sees weaker demand, a company’s cheaper loan may be offset by poorer sales. That is why the simple rule that “rates were cut, so that is good for shares” does not explain the market’s entire reaction.
During the autumn, the European Central Bank kept the rate paid on banks’ overnight deposits at 2.00%. Its 11 September decision was announced before this rolling twelve-month period began, but established its starting backdrop. The rate remained unchanged at the October and December meetings. The US and the euro area were therefore already following different paths.
November: trade gained some breathing room, but not an end to every barrier
On 1 November, the US announced the terms of an agreement with China providing for reductions in some tariffs and a suspension of rare-earth export restrictions from 10 November. This was an important signal of relief for supply chains. Rare earths are used in a range of industrial and technological equipment, so the availability of these materials matters to more than just their producers.
However, temporary relief is not a permanent, unchanging rule. A factory needs to know when a component will arrive and what its final cost will be. Uncertainty encourages companies to hold larger inventories or seek a more expensive alternative supplier. The November decision therefore cannot automatically be presented as the tariff applying to all goods today: subsequent measures have their own legal bases and conditions.
January 2026: switching energy suppliers became a concrete plan
On 26 January, the Council of the European Union approved a gradual phase-out of Russian gas imports. A full ban on liquefied natural gas is scheduled from the beginning of 2027, and on pipeline gas from autumn 2027. These are future deadlines with transition periods, not a halt to all imports on that January date.
This decision turned diversification into a matter of contracts and infrastructure. Other suppliers, ships, terminals and reserves were needed. Over time, a wider choice of suppliers may reduce dependence, but the transition itself also costs money. Investors need to distinguish the long-term benefits of resilience from the near-term bills for energy and infrastructure.
Meanwhile, the US central bank was in no hurry to continue the autumn cuts. The 3.50–3.75% range remained unchanged at its January, March and April meetings. Europe’s February, March and April decisions also maintained the 2.00% deposit facility rate. Earlier cuts were not a promise that every subsequent meeting would follow the same pattern.
February: the legal basis for tariffs changed
On 20 February, the US Supreme Court ruled that the International Emergency Economic Powers Act does not authorise the president to impose tariffs. The decision restricted a specific legal basis. It did not mean that all US import tariffs disappeared, because other measures relied on different laws.
On the same day, the administration announced a temporary 10% import surcharge, with exemptions, under a different section of the Trade Act. The proclamation specified a start on 24 February and a 150-day period until 24 July. This is a historical measure, not a tariff automatically applying to all imports today.
For businesses, changes like these mean having to recheck a product’s origin, classification code, delivery date and exemptions. An importer uncertain of the final cost may delay an order or hold more inventory. Even a politically favourable headline therefore does not always immediately reduce a company’s costs or increase its sales.
February's results showed that technology demand was more than a promise
On 25 February, chip designer NVIDIA reported results for its financial year ended 25 January. Revenue reached $215.938 billion, while net income under US accounting standards was $120.067 billion. Both figures were 65% higher than in the company’s previous financial year. These are results for a completed period, not a forecast for calendar year 2026.
This matters to the longer story: technology suppliers were generating visible, actual earnings well before the summer results season. But profit does not answer the question of an investment’s price. Even a successful company may be valued on very high expectations for the future that subsequently prove harder to meet.
Spring: geopolitical risk became an oil delivery problem
The war in the Middle East that began on 28 February disrupted oil shipments through the Strait of Hormuz. On 11 March, International Energy Agency member countries agreed to make 400 million barrels of emergency oil reserves available to the market. This was the largest coordinated release amount in the agency’s history. The decision was a commitment to release reserves, not the release of the entire volume in one day.
Reserves can buy time, but cannot replace commercial supply indefinitely. When reliable deliveries are lacking, the effects spread from the oil market to fuel, transport, chemicals and household purchasing power. More expensive energy can simultaneously raise inflation and weaken growth. A central bank faces an uncomfortable choice: raising interest rates does not produce additional oil, but cutting them may stimulate demand at a time when supply is constrained.
May: the story of global trade was not only one of closing borders
On 1 May, provisional application of the trade agreement between the European Union and the South American Mercosur countries began. Tariffs on some goods were reduced or removed. This marked a move from negotiations to applicable trade preferences, but was not yet the full, finally ratified partnership agreement.
European exporters gained opportunities to reach buyers on more favourable terms. For importers, a wider choice may help reduce dependence on a single supplier. At the same time, greater competition puts pressure on more vulnerable sectors. Actual orders and the use of trade preferences ultimately reveal the investment significance, not just the headline on the day an agreement is signed or takes effect.
June and July: Europe's interest rate direction reversed
On 11 June, the European Central Bank announced a 0.25 percentage point rate increase. The deposit facility rate rose to 2.25% from 17 June. It was left unchanged on 23 July. The US maintained its 3.50–3.75% target range at the 17 June and 29 July meetings. US cuts had therefore given way to a pause, while Europe had already turned towards higher rates.
The 18 June memorandum between the US and Iran raised hopes of normalising supply. But the International Energy Agency’s 10 July report already described ceasefire breaches on 7–8 July. Its August edition showed weaker oil export flows in July. An agreement and its implementation proved to be two separate stages that matter to investors.
On 23 July, the European Union expanded its energy and financial sanctions against Russia. The Office of the US Trade Representative announced a decision concerning 60 economies under Section 301 of the Trade Act on the same day. Tariffs depended on the product and applicable conditions; this was not an automatic extension of the temporary surcharge announced in February. Over the year, both supply routes and the rules governing what buyers pay for goods changed.
Summer: the supplier's profits grew while customers faced the expansion bill
On 26 August, NVIDIA reported revenue of $96.221 billion for the quarter ended 26 July. Revenue was 106% higher and operating profit 124% higher than a year earlier. This result confirmed that demand for the supplier remained real. Its customers, however, pay for equipment, data centres and electricity infrastructure before receiving all their expected revenue.
In late July, Microsoft reported that it generated $55.4 billion in operating cash flow during the quarter ended 30 June and spent $35.8 billion in cash on purchases of long-term assets. In Oracle’s quarterly results released in September, capital expenditure already exceeded operating cash flow. These are not identical businesses, but the comparison shows why the technology story requires monitoring more than revenue growth.
Early September: prices brought attention back to interest rates
On 9 September, the US Energy Information Administration raised its forecast for the average Brent price in the second half of the year to around $90 per barrel. The publication used model inputs finalised by 3 September. It therefore does not measure the impact of later military reports in September and is not the latest exchange price.
On 10 September, the European Central Bank announced another 0.25 percentage point rate increase. On 11 September, the US Consumer Price Index showed annual price growth of 3.4% in August, unchanged from July. Seasonally adjusted monthly growth increased from 0.1% to 0.4%. However, annual growth in the basket excluding food and energy slowed from 2.5% to 2.4%. Monthly growth in this basket nevertheless increased from 0.2% to 0.3%. The conclusion is therefore not that “all price indicators are worsening”, but a more complex combination of differing rates of change.
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The interest rate path in one place
The table shows changes to key US and euro area interest rates announced within this twelve-month period through 17 September, the July decisions to leave them unchanged, and an earlier US decision establishing the starting backdrop. It is not a list of every meeting. Europe’s decision announced on 10 September took effect on 16 September.
| Decision date | Region | Before | After | When it applies |
|---|---|---|---|---|
| 2025-09-17 | US | 4.25–4.50% | 4.00–4.25% | From 18 September |
| 2025-10-29 | US | 4.00–4.25% | 3.75–4.00% | From 30 October |
| 2025-12-10 | US | 3.75–4.00% | 3.50–3.75% | From 11 December |
| 2026-06-11 | Euro area | 2.00% | 2.25% | From 17 June |
| 2026-07-23 | Euro area | 2.25% | 2.25% | Left unchanged |
| 2026-07-29 | US | 3.50–3.75% | 3.50–3.75% | Range left unchanged |
| 2026-09-10 | Euro area | 2.25% | 2.50% | In effect from 16 September |
| 2026-09-16 | US | 3.50–3.75% | 3.75–4.00% | From 17 September |
For the US, the table shows the federal funds target range; for the euro area, it shows the specific deposit facility rate. Europe’s 2.50% rate took effect on 16 September. On 17 September, the US range was 0.25 percentage points lower than after the decision of 17 September 2025 that established the starting backdrop. The European deposit rate rose 0.50 percentage points. The US increase of 16 September is included in the table.
? Consumer Price Index: why does the monthly change matter too?
The Consumer Price Index is compiled using the prices of goods and services and their weights in consumption. The annual change compares prices with the same month of the previous year. The seasonally adjusted monthly change helps show the latest pace. The annual figure can therefore remain unchanged even when prices rise faster in the latest month.
Mid-September: the timing of recovery became a key assumption again
The International Energy Agency’s 11 September forecast projects a larger decline in oil supply than in demand this year. This is a forecast, not a final annual result.
16–24 September: the relief in interest rates did not last
On 16 September the Federal Reserve raised its target range to 3.75–4.00%. An earlier European decision lifting the deposit rate to 2.50% took effect on the same day. The US ten-year yield fell to 4.96% on 21–22 September, but reached 5.18% on 24 September. A few days of easier financing conditions did not become a lasting direction.
The preliminary US Purchasing Managers’ Index, or PMI, reached 58.4 in the release of 23 September, compared with 56.0 in August. Initial unemployment benefit claims of 197,000 for the week ending 19 September, released on 24 September, reinforced the picture of resilience. These are signals from 23–24 September, but neither a survey nor one week of claims is a final measure of an entire quarter’s growth.
? Purchasing Managers’ Index: what does the threshold mean?
The company survey compares activity with the previous month. Above 50 generally indicates expansion and below 50 contraction. A reading of 58.4 does not mean growth of 58.4%; the preliminary measure may be revised.
September’s decisions extended beyond the US and euro area. On 18 September the Bank of Japan set an overnight interest-rate target of 1.25%, effective from 24 September. On 17 September the Bank of England left Bank Rate at 3.75%. These different paths matter for Japanese bonds and yen-funded investments, as well as British companies’ borrowing costs.
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Year
What matters now
US–China trade relief moved closer, but tariffs have not yet been cut
The weekend brought businesses more reason to hope for easier trade, but it did not yet reduce their bills. On 27 September the White House published US and Chinese product lists under the “30 for 30” trade initiative. The trade under consideration is worth approximately $30 billion in each direction. This is a concrete negotiating step, not tariff removal already in force or money already paid. On Monday morning, the key question is not simply the size of the initiative, but which goods would qualify, when relief would begin and what conditions would apply.
? “30 for 30”: what does the amount mean?
The $30 billion on each side refers to the scope of its product list. It is neither a 30% tariff nor additional corporate profit of that amount. Exchanging lists and bringing final tariff changes into force are separate stages.
If lower tariffs take effect, an importer could pay less for the same goods. Some of the benefit might remain in profit and some might reach customers through lower prices. Clearer rules could also reduce the need to hold large inventories. That would help industrial suppliers and retailers dependent on bilateral trade; logistics businesses need to see whether an agreement generates actual additional orders.
The opportunity is lower costs in specific supply chains, not a uniform rise in all US and Chinese shares. Exemptions, delayed implementation and conflicting conditions remain risks. An exporter whose products are not included may see no benefit. Final product codes, tariff rates and effective dates will be the next evidence capable of changing the assessment. Until then, a promise should not be counted as profit already earned.
A 5.17% US yield: trade hopes do not guarantee cheaper loans
Trade conditions can improve while borrowing remains expensive. On Friday, 25 September, the US ten-year Treasury yield stood at 5.17%. That was 0.01 percentage points below Thursday, but 0.21 points above the 4.96% recorded on 22 September. The small final-session decline therefore did not undo the earlier rise. These readings describe completed US sessions, not a supposed Monday morning response to Sunday’s negotiations.
? Bond yields: how should 5.17% be read?
A yield relates a bond’s market price to its future payments; this is the US Treasury’s standardised ten-year measure. A move of 0.21 percentage points is 21 basis points, not a 21% investment return. When yields rise, the prices of existing fixed-rate bonds generally fall.
Business demand is not uniformly weak either. Figures released on 25 September showed August US durable-goods orders of $338.6 billion, virtually unchanged from revised July. Orders for non-defence capital goods excluding aircraft, however, rose 1.6%, while shipments increased 0.6%. That is a more favourable signal for equipment suppliers than the flat headline alone suggests. An order is nevertheless not yet a delivery or an earned profit.
? Business-equipment orders: what does the comparison show?
The narrower category excludes defence and aircraft, helping separate some large, irregular orders. Changes compare August with revised July, adjusting for normal seasonality but not for prices. This is not a measure of all business investment: for example, new semiconductor orders are excluded.
Investors therefore face two different tests. Industrial-equipment suppliers need orders that turn into deliveries, while property companies and rapidly expanding technology businesses also depend on the price of new debt. Longer-maturity bonds could benefit if price growth slows and yields decline. But resilient demand and rising input costs could postpone that relief. US spending and price data on 30 September will help test whether sales remain supported without strengthening inflation.
Chinese industrial profit growth slowed: trade promises cannot replace demand
The latest Chinese figures are a reminder that proposed easier trade rules still have to turn into earnings. Data released on 28 September showed that profit at larger industrial enterprises was 4.2% higher than a year earlier in August. July’s annual increase was 11.2%. Profit was therefore still growing, but at a slower pace. These figures do not mean profit fell 7% month on month: the difference between the two annual growth rates is 7.0 percentage points.
? Industrial profit: what does the measure cover?
China’s statistics cover industrial enterprises with annual revenue from principal activities of at least 20 million yuan, with growth calculated on a comparable sample. August’s annual change compares it with August a year earlier, not with July. This is not a measure of every Chinese company or of stock-market returns.
The economic link is straightforward: selling more goods can lift revenue, but lower selling prices or higher costs can absorb part of the benefit. Output alone therefore does not tell us how much money a business keeps. Chinese customers’ profitability matters to European industrial and commodity suppliers because it affects their ability to order equipment and raw materials. Export relief would be more helpful to Chinese manufacturers if genuine end demand also strengthened.
The opportunity would improve if trade relief and recovering orders allowed businesses to protect prices and profit. The opposite is the risk: higher output can come with excess supply and larger discounts. Holdings in equipment suppliers and metals producers therefore depend on more than China’s economic growth targets. The next manufacturing and orders surveys, followed by sales and profit data, will help show whether August’s slower pace was temporary.
More crude in storage does not mean an equally large fuel cushion
Energy risk should not be reduced to a single total for crude oil in storage. The latest US weekly report available this morning was released on 23 September and covers the week ending 18 September. Commercial crude stocks excluding the strategic reserve stood at 426.4 million barrels, around 2% above their five-year seasonal average. Petrol stocks were 6% below their own average and distillates 12% below theirs. These are neither 28 September prices nor a new weekend measurement of inventories.
? Distillates and seasonal averages: what is being compared?
Distillates include diesel and heating-oil products. Each product’s inventory is compared with its own average at the same time of year over five years. A 12% shortfall in stocks is neither an equivalent price rise nor an equivalent shortfall in total demand.
The refining chain explains why these figures can move in different directions. Crude still has to be turned into a specific fuel and delivered to its buyer. If less is processed, crude can build up in storage while finished-product stocks are replenished more slowly. For a haulier, airline or chemical plant, the final fuel bill matters; for a refiner, the gap between crude purchase prices and product selling prices matters.
Rebuilding fuel stocks would help the profitability of transport and energy-intensive industry. Another supply disruption while inventories remain below normal could raise costs and prolong the inflation problem. The next weekly US report needs to be read across refining throughput, petrol and distillate stocks together. More crude alone is not an improvement across the whole supply chain.
Consumer views caution against calling all demand strong
Consumer sentiment provides a counterweight to business orders. The University of Michigan’s final September index, released on 25 September, fell from 51.7 to 48.1. Respondents’ expectations for price growth over the year ahead increased from 4.0% to 4.6%. This is not measured inflation, but households’ assessment. An equipment maker and a retailer dependent on discretionary purchases can therefore receive different signals from the same US economy.
? Consumer sentiment: what does an index of 48.1 mean?
The University of Michigan survey summarises households’ views of their finances and economic prospects. A higher reading means a more favourable assessment; it does not use the Purchasing Managers’ Index threshold of 50 for expansion. Survey inflation expectations are neither actual price statistics nor a central-bank forecast.
The week’s question: will lower trade barriers turn into higher profit?
Monday’s thesis is not that better negotiations make every asset rise. Trade relief could lower some business costs, but expensive debt, slower customer profit growth and fuel bills can offset that benefit. Implementation of relief and stronger orders would support the thesis. Larger discounts and deteriorating earnings would weaken it. Final trade terms and this week’s price and spending data therefore need to be assessed together.
For industrial and retail holdings, the products covered by any agreement matter. For longer-maturity bonds and companies financing expansion with debt, the persistence of high yields matters. For transport and chemicals, fuel supply matters. A business with less debt and more cash reserves may withstand the same cost change more easily. Exchange rates also affect a euro investor’s unhedged dollar investments; this review makes no claim about an unverified currency move.
Year
What comes next
Three tests to watch next
- Final US–China trade terms. Product codes, tariff rates, exemptions and effective dates matter. Exchanging lists is not the same as cheaper goods already delivered.
- US spending and price data on 30 September. August’s Personal Consumption Expenditures Price Index will test inflation, while real expenditure will show changes in the volume purchased rather than simply the money spent.
- Manufacturing demand and fuel stocks. New business surveys and the next weekly US energy report will show whether orders and supply buffers are improving together. Until publication, these are signals to watch, not reported results.
? Personal Consumption Expenditures Price Index: what does it measure?
The index measures changes in the prices of goods and services consumed, including spending made by others on consumers’ behalf. Its weights adjust with the composition of spending. Real consumption expenditure removes the effect of price changes, so it answers a different question from inflation.
Important. This is general market analysis, not a personal recommendation to buy or sell. Historical data and company results do not guarantee future returns. Forecasts and conditional scenarios may not materialise.
How is the history preserved and updated?
All five periods in this edition share one information date. Week means the latest 7 days, quarter means 90 days, and year means the trailing 12 months. The next dated edition will have a separate URL. This text keeps its date and assessment; later events are not silently inserted into an older edition. Longer periods assess new evidence alongside earlier developments without repeating every headline.
