Year · Market review
Year: inflation and energy changed the path of interest rates
From 3 October 2025 to 2 October 2026, US interest-rate cuts gave way to a pause and a September increase. Trade rules and energy supply disruption changed business costs, while artificial-intelligence chip designer NVIDIA increased profit. The latest evidence shows why these developments cannot produce one answer for an entire portfolio: demand remains resilient, but debt and production costs differ across countries and sectors.
Period covered: 2025-10-03 – 2026-10-02Information as of 20 min read
On 1 October, the US manufacturing survey showed stronger new orders and greater input-price pressure, while Treasury yields fell. Euro-area August lending figures and second-quarter house-price data were released on the same day.
The US and euro-area central bank rate increases made in September remain in effect. One session’s move in US bond yields does not automatically reduce households’ or businesses’ existing loan payments.
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 before the period beginning on 3 October 2025. 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: the US and China agreed to ease some tariffs and export restrictions
On 1 November 2025, the US announced the terms of an agreement with China. The US committed to reducing the cumulative fentanyl-related tariff on Chinese goods by 10 percentage points from 10 November. China committed to suspending new rare-earth export controls announced on 9 October. These materials are used in industrial and technological equipment, so supply conditions matter 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.
December: the UK cut interest rates while Japan raised them
On 18 December 2025, the Bank of England announced a 0.25 percentage point cut in Bank Rate to 3.75%. The next day, the Bank of Japan announced an increase in its overnight interest-rate target from 0.50% to 0.75%, effective from 22 December. UK borrowers gained the prospect of cheaper credit, while conditions for new borrowing and replacing old debt with new loans tightened in Japan.
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.
Replacing Russian gas required new supply 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 EU–Mercosur agreement reduced some tariffs
On 1 May 2026, provisional application began for the European Union’s trade agreement with Argentina, Brazil, Paraguay and Uruguay, the Mercosur countries. Initial tariff reductions took effect for products including cars, pharmaceuticals and some food and drink, such as wine and olive oil. These were applicable trading terms, but not yet the fully 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.
On 16 June 2026, the Bank of Japan decided to raise its overnight interest-rate target again, from 0.75% to 1.00%, effective from 17 June. It left that target unchanged on 31 July. Borrowing in Japan was therefore becoming more expensive before the September decision, affecting Japanese bonds and investments financed with borrowed yen.
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 energy and financial sanctions against Russia. On the same day, the Office of the US Trade Representative announced tariff measures on imports from 60 economies, including the European Union, over insufficient bans on imports of goods made with forced labour. Tariffs depended on products and exemptions; this was not an extension of February’s temporary surcharge. Importers had to check both supply availability and the tariff applying to each product.
Summer: NVIDIA’s profits grew while its customers invested heavily in infrastructure
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.
On 29 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. On 10 September, Oracle reported $28.5 billion in capital expenditure and $23.1 billion in operating cash flow for the quarter ended 31 August. The two companies’ quarters ended on different dates. 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.
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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 30 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 30 September, the prevailing 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: oil supply was forecast to fall more than demand
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: US bond yields rose again after a brief decline
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. The fall in US bond yields was therefore short-lived.
The preliminary S&P Global US PMI Composite Output Index, covering manufacturing and services activity, reached 58.4 in the release of 23 September, compared with 56.0 in August. Seasonally adjusted initial unemployment benefit claims of 197,000 for the week ending 19 September, released on 24 September, added to the evidence that the economy was not weakening sharply. On 1 October, that week’s claims were revised to 198,000; the newer week ending 26 September recorded 197,000. Claims are not a count of jobs created or 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.
25–28 September: uneven demand and trade relief not yet in force
US August durable-goods orders, reported on 25 September, reached $338.6 billion and were virtually unchanged from revised July. Orders for non-defence capital goods excluding aircraft nevertheless rose 1.6%, while shipments increased 0.6%. These are monthly changes adjusted for seasonality, but not for prices. On the same day, the University of Michigan’s final September consumer sentiment index stood at 48.1, compared with 51.7 in August. Business-equipment demand and households’ assessments were therefore sending different signals.
On 27 September, the White House published US and Chinese product lists proposed for lower import tariffs worth about $30 billion in each direction. The US list of imports from China includes plastic tableware and bedding; China’s list of imports from the US includes beef and dairy products. This publication did not bring tariff reductions into force. On 28 September, China reported that August profit at larger industrial enterprises was 4.2% higher than a year earlier; July’s growth was 11.2%. These are year-on-year comparisons; they do not show whether profit rose or fell from July to August. Companies’ profits would depend not only on lower tariffs, but also on selling more goods at profitable prices.
30 September: spending remained resilient while energy prices rose
Figures released by the US Bureau of Economic Analysis on 30 September showed real consumer spending rising 0.6% month on month in August, while real disposable income was unchanged. The Personal Consumption Expenditures Price Index, or PCE, was 3.4% higher year on year; excluding food and energy, the increase was 3.0%. July’s annual readings were identical in the same revised data series.
? Personal consumption price index: what does it measure?
The Personal Consumption Expenditures Price Index measures price changes for goods and services purchased for consumers, including some spending on their behalf. Excluding food and energy separates out more volatile prices; the measure is not growth in the volume of consumption.
Germany’s preliminary national September inflation rate rose from 2.9% to 3.3%, with energy inflation increasing from 10.5% to 14.9%, while the rate excluding food and energy remained at 2.4%. France’s measure under the common European methodology rose from 2.6% to 3.4%. On the same day, China’s manufacturing survey index rose from 49.8 to 50.1, but its new-orders index fell from 50.6 to 50.5 and the raw-material purchase-price index increased from 56.6 to 60.8. The different indices showed growing activity alongside uneven cost increases.
US Energy Information Administration figures released on 30 September put commercial crude stocks at 427.3 million barrels in the week ending 25 September, 2.6% above a year earlier. Petrol inventories were nevertheless 7.4% lower, and distillates, including diesel and heating products, 14.9% lower. A rise in crude stocks therefore did not by itself resolve the question of finished-fuel supply.
On 30 September, the US Bureau of Economic Analysis revised second-quarter real gross domestic product growth, the value of goods and services produced in the country, from an annualised 1.5% to 2.2%. That is 0.6% above the previous quarter. The revision describes April–June demand, not September production.
30 September: memory-chip maker Micron reported higher revenue
US memory-chip maker Micron reported on 30 September that revenue for its fiscal quarter ended 3 September was $54.229 billion, compared with $11.315 billion a year earlier. This year’s quarter contained 14 weeks against 13 in the previous year, so the periods are not identical in length. The result added to the record of rising technology-supplier revenue. However, the value of the company’s shares depends on more than revenue already earned: it also matters how much future growth investors already expect.
US factory orders expanded, but input prices rose too
The Institute for Supply Management’s US manufacturing survey, released on 1 October, showed continued sector expansion in September. Its Manufacturing Purchasing Managers’ Index, or PMI, was 54.5, compared with 54.6 in August. The broad growth signal was therefore almost unchanged.
A more important contrast emerged within the survey. The new-orders index rose from 53.7 to 55.3, while the prices-paid index increased from 71.1 to 77.9. Stronger orders can support manufacturers’ sales, but more expensive materials can reduce profit if a company cannot raise selling prices or cut other costs.
US Treasury data show that the ten-year yield fell from 5.29% to 5.24% on 1 October. The two-year yield declined from 4.88% to 4.78%, and the thirty-year yield from 5.64% to 5.61%. The shorter maturity had the larger fall, but one day’s move does not establish where interest rates will be a month later.
? Yields and basis points: how should the change be read?
The US Treasury measure is a standardised annual government-bond yield for a given maturity, calculated from market quotations. One basis point is 0.01 percentage points. This is not the coupon or daily return; falling yields generally support existing fixed-rate bond prices.
The longer comparison helps put one session in perspective. The ten-year yield at the end of September was still well above its end-August level. The cost of new loans and newly issued corporate bonds depends on more than government yields: lenders also assess the individual company’s ability to repay. A lower US government benchmark therefore does not mean the same reduction in financing costs for every business.
France borrowed almost €12 billion, but its bonds carry different interest costs
France’s debt agency allocated €11.999 billion of long-term bonds at the initial auction on 1 October, with settlement scheduled for 5 October. The largest share, €6.271 billion, was the issue maturing on 25 November 2036. Its average auction yield was 4.93%, although the annual coupon is 3.70%: buyers purchased the bond below its face value.
? Coupon and yield: why are they different?
The coupon is calculated from a bond’s face value, whereas the yield also takes account of its purchase price and repayment at maturity. Buying below face value can produce a yield above the coupon if payments are made and the bond is held to maturity.
This is the auction result for a particular issue, not the daily move in the entire French ten-year government-bond market. The 2027 funding plan published on 29 September envisaged greater borrowing needs, partly to redeem old bonds. Investors must absorb the additional bond supply, making the interest compensation they require important to the state. For holders of French bonds this poses a price risk; for new buyers it offers an opportunity to weigh the income against the state’s finances.
Euro-area mortgages and consumer credit became more expensive in August
On 1 October, the European Central Bank published August statistics on new bank lending. The euro-area mortgage rate indicator rose by 0.06 percentage points to 3.60%, while the consumer credit rate increased by 0.33 percentage points to 7.92%. The corporate borrowing cost indicator was almost unchanged at 3.77%. These are euro-area averages, not an offer from an individual Lithuanian bank; August figures do not yet show the effect of the ECB’s September rate increase.
For a home buyer, a higher interest rate means a larger payment on an otherwise identical new loan, with its size and term unchanged. More expensive consumer credit reduces households’ ability to finance spending through borrowing. That can mean more cautious customers for retailers and higher income from new lending for banks, alongside a greater risk that some borrowers struggle with repayments.
? New lending rates: whose borrowing costs do they describe?
These banking statistics summarise new agreements and their weights across the euro area, rather than interest rates on all outstanding loans. An individual offer depends on the country, loan terms and borrower; changes in the mix of agreements can also affect the monthly average.
Lithuanian house prices rose much faster than the euro-area average
On 1 October, Eurostat reported that Lithuanian house prices were 14.3% higher year on year in the second quarter and 5.0% above the first quarter. The corresponding euro-area changes were 4.0% and 1.1%. These are transaction-price data for April–June, not October asking prices.
Someone buying a home in Lithuania needs to consider both its price and the future mortgage payment. However, second-quarter house-price growth cannot be explained by euro-area lending rates observed later, in August. For an owner, a price increase is not yet a net gain: loan interest, maintenance, taxes and purchase and sale expenses affect the result.
? House Price Index: what does it cover?
The index measures transaction-price changes in new and existing residential properties purchased by households; neither inflation nor seasonal effects are removed here. It is not a rental yield or a return on all types of property. Annual and quarterly changes use different comparison periods.
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Year
What matters now
Debt maturities and portfolio concentration matter more than one daily figure
Falling yields generally help holders of long-term fixed-rate bonds, while reducing the income offered on newly purchased bonds. For a highly indebted property business or utility, the important question is when an old loan must be repaid and replaced. Payments on an existing fixed-rate loan do not automatically change when market yields move.
Stronger orders give industrial companies an opportunity to increase sales. Greater risk falls on those unable to pass higher material costs on to customers. For bank and consumer-company shares, meanwhile, an important question is whether households can afford higher repayments without cutting other spending. New wage, loan-quality and company-profit figures will help test those conditions.
The Lithuanian house-price comparison is particularly relevant to an investor whose assets are concentrated in one property or country. A rising property value can increase total wealth, but it does not provide the same ready access to cash as easily sold investments. Comparing housing with shares or bonds requires matching periods and currencies and including all income and costs, rather than considering the price index alone.
The currency effect for euro investors
The latest ECB reference rate published before the cutoff was 1.1298 US dollars per euro on 1 October, compared with 1.1355 on 30 September. A weaker euro increases the euro value of an unchanged dollar investment, but its actual result also depends on the investment’s own price and any currency hedging.
At ECB reference rates, one euro bought 1.1596 US dollars on 31 August and 1.1355 on 30 September. If an asset’s dollar value had stayed unchanged, translating it into euros would have added about 2.12% during September, before costs and without currency hedging. The corresponding full-third-quarter currency effect, starting from the 30 June rate of 1.1394, would be about 0.34%. These are historical calendar-period comparisons, not share returns or the exchange rate on 2 October.
Year
What comes next
- 2 October: the US September employment report. It was still due at the edition’s data cutoff. Employee numbers and wages will help assess whether household income can support spending.
- 7 October: US weekly fuel inventories; 14 October: consumer prices. These releases will show whether constrained fuel supply continues to affect costs and whether price pressures are spreading.
- 28–29 October: central bank decisions and US growth data. The US decision is scheduled for 28 October; the ECB decision and first US third-quarter growth estimate for 29 October. They will help test whether demand remained resilient and whether the banks are changing their interest-rate direction.
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.
