Year · Market review
Year: energy and interest rates test company profits
Over the trailing year, a phase of rate cuts gave way to renewed inflation and energy pressures. Trade decisions, supply disruptions and large technology investments affected companies differently. At the start of October, the question is two-sided: can profits offset costlier funding, and will weaker demand make further sales growth harder?
Period covered: 2025-10-07 – 2026-10-06Information as of 21 min read
The US services survey released on 5 October showed slower expansion and stronger cost pressures. Germany’s August orders report, published on 6 October, revealed how much large contracts influenced the headline decline.
Higher market yields improve the terms for a new bond buyer but can reduce the value of existing bonds. Companies remain exposed when old debt has to be replaced with more expensive borrowing.
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 7 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.
For your investments
Let’s discuss your portfolio
FINANCIAL FREEDOM01 / 04Investment results since 1999
Are you beating
global equities?
at the end of the period
Jan 1999–Jun 2026 · EUR · Cumulative return, %
Linear scale · * MSCI World → MSCI ACWI.
Past performance does not guarantee future returns.
FINANCIAL FREEDOM02 / 04Historical comparison
How far did it fall?
How long to recover?
Decline from the previous high
Longest recovery to the previous high
Jan 1999–Jun 2026 · EUR · Monthly data
* MSCI World → MSCI ACWI.
Past performance does not guarantee future returns.
FINANCIAL FREEDOM03 / 04Personal investment consultation
Already investing?
Let’s review your portfolio.
Yet to start
investing?
Let’s build your first
investment plan.
FINANCIAL FREEDOM04 / 04
Personal investment
consultation
Martynas
Juška
Investment manager
Managing a portfolio
of more than€100 million
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, at that time 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 lists covering about $30 billion of imports in each direction, proposed for lower tariffs. 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 Purchasing Managers’ 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.
1 October: orders held up while new borrowing cost more
The Institute for Supply Management’s September manufacturing survey, released on 1 October, put its Purchasing Managers’ Index at 54.5. Activity was still expanding, but the prices-paid index increased from 71.1 to 77.9. For a manufacturer, this means an opportunity to sell more without necessarily earning more if higher material costs cannot be passed on to customers.
On the same day, the European Central Bank reported that the euro-area new mortgage rate indicator rose to 3.60% in August, consumer credit rates to 7.92%, while the corporate borrowing cost indicator was almost unchanged at 3.77%. These are averages for new agreements, not changes in payments on existing Lithuanian loans. August statistics do not yet show the effects of the subsequent September rate increase.
Eurostat reported on 1 October that Lithuanian house transaction prices were 14.3% higher year on year in the second quarter, against 4.0% in the euro area. This April–June comparison describes prices, not rental income or net investment returns. A home buyer needs to consider both the purchase price and future mortgage payment, but later euro-area lending rates cannot be presented as the cause of earlier Lithuanian price growth.
2–4 October: US jobs growth slowed while energy risks persisted
On 2 October, the US Bureau of Labor Statistics reported that nonfarm payrolls rose by 29,000 in September, following a revised increase of 133,000 in August. The combined July and August result was revised down by 60,000. The weakness was not confined to the latest month: the earlier path of jobs growth was also lower than previously reported.
The September unemployment rate was 4.2%. Slower jobs growth can limit growth in household income and discretionary spending. These figures do not by themselves establish an economy-wide downturn, however.
? Unemployment rate: what is the denominator?
It is the share of the labour force who are not employed, are actively looking for work and are available to work, rather than a share of the whole population. Unemployment and payroll figures come from different surveys, so their monthly movements need not match.
Also on 2 October, Eurostat’s flash estimate showed euro area annual consumer inflation rising from 3.2% to 3.8% in September. These are prices paid by consumers, not the producer selling prices discussed below. On 4 October, seven countries in the OPEC+ group of oil producers retained September production targets for November; these are agreed volumes, not confirmed actual oil supply.
US shares rose alongside bond yields
On 5 October, the Nasdaq Composite index of US-listed shares rose 1.05% from its 2 October close. This is a price change in US dollars, not a euro return. The US Treasury’s 10-year yield increased from 5.28% to 5.31% on the same day.
? Bond yields: what does the change mean?
These are nominal annual US Treasury yield-curve estimates based on indicative market prices, not returns earned over a day. A rise from 5.28% to 5.31% is 0.03 percentage points, or 3 basis points; it does not change a bond’s fixed payments.
US services growth slows while cost pressures intensify
On Monday, 5 October, the US Institute for Supply Management released its September Services Purchasing Managers’ Index (ISM Services PMI). It fell from 55.4 to 54.9 points but remained above the expansion threshold. Meanwhile, the prices index rose from 72.6 to 74.0 points. Business activity was therefore growing more slowly while cost pressures were intensifying.
? Services and prices indexes: what do they measure?
The survey compares business conditions with the previous month. The services index gives equal weight to activity, new orders, employment and supplier deliveries; a reading above 50 points indicates expansion overall. The separate prices index measures how widespread price increases are, so 74 points does not mean 74% inflation.
German orders fell 10.6%, but that is not the pace of decline across all industry
On 6 October, Germany’s statistical office Destatis reported that manufacturing orders had fallen 10.6% in August compared with July. Excluding large orders, however, the decline was just 0.1%. That difference changes the interpretation: the double-digit headline fall does not mean that every factory lost a similar share of its future work.
Most of the decline came from the category covering ships, aircraft, trains and military vehicles. July had brought an exceptionally high volume of large contracts in this category. Such orders arrive unevenly, while production and payments can take much longer. One weak month for orders is therefore not the same as an equivalent loss of revenue already earned.
Even so, the weakness is not just statistical noise. In June–August, orders excluding large contracts were 2.6% below the previous three months. A weaker flow of regular orders makes it harder for industrial component and equipment manufacturers to keep their factories busy in the future.
? Manufacturing orders: what does this measure show?
The measure tracks new orders received by manufacturers after removing the effect of price changes. The monthly comparison is seasonally and calendar adjusted; August figures are provisional. An order is not a product already made or revenue received, while the measure excluding large contracts helps reveal the steadier flow of business.
Energy prices are rising much faster than other producer prices in Europe
On 5 October, Eurostat reported that euro area industrial producer prices had risen 1.9% month on month in August. Energy prices rose 5.6%, while total industry excluding energy recorded just 0.2%. This is not an equally sharp increase everywhere: businesses buying energy face the greatest pressure.
Profits at chemical, metal and other energy-intensive manufacturers may fall if higher electricity or fuel costs cannot be offset by higher selling prices. Energy suppliers may gain revenue from higher prices, but their profits also depend on their own costs and the volume sold.
On the same day, European Central Bank Executive Board member Philip Lane explained the other side of this pressure: expensive energy leaves households with less money for other purchases, while higher long-term interest rates restrain consumption and investment. Inflation risks can therefore rise even as demand weakens. This was his assessment, not a new interest-rate decision.
? Industrial producer prices: what does this measure show?
The Industrial Producer Price Index measures manufacturers’ selling prices in the domestic market, not their entire cost basket or consumer inflation. The comparison is between August and July; the energy category’s 5.6% is not its percentage-point contribution to the overall measure.
Investment consultation
Do your investments work together?
Review where your money is invested, how much depends on a single market and whether your plan fits your goals. Leave with clearer next steps.
See the consultation process and terms on the registration page.
Year
What matters now
Why do rising shares not yet ease borrowers’ problems?
Interest rates are not the only influence on shares: improving profit expectations can offset more expensive borrowing. But higher refinancing costs can reduce profits for heavily indebted property companies. Bonds present a different distinction: a new buyer receives a higher yield, while the market prices of existing fixed-payment bonds generally fall. Longer-dated bond funds usually respond more strongly. One Monday of rising shares does not remove this risk.
Retailers and leisure companies still have opportunities to increase sales, but higher operating costs can reduce profits. For logistics businesses, the question is whether these costs can be passed on to customers. If not, profit margins narrow. Nevertheless, the survey does not yet point to a broad decline in demand: expansion continues, albeit at a slower pace.
In Europe, sales volumes matter as well as higher prices
Transport-equipment manufacturers with large contracts may have better prospects than the headline figure suggests. A wider range of industrial suppliers still faces the risk of weaker demand, limiting revenue and profit.
Consumer businesses need to watch whether customers cut discretionary purchases. Weaker demand could support bonds if it reduces future inflation, but prolonged energy price increases would work in the opposite direction.
The dollar strengthened slightly against the euro
The ECB reference rate was 1.1204 US dollars per euro on 5 October, compared with 1.1225 on 2 October. Other things equal, a stronger dollar increases the euro value of unhedged dollar assets, but also makes imports paid for in dollars more expensive. The investment’s final return also depends on the asset price. This is Monday’s reference rate, not a live Tuesday transaction price.
Year
What comes next
On 6 October, Eurostat’s August retail trade release is scheduled for after this review’s data cutoff. It will show whether the volume of goods purchased by households increased despite higher energy prices.
On 7 October, Destatis will publish German production data for August. Did factory output also fall, or did work on earlier orders sustain production volumes?
On 7 October, the Federal Reserve will release the minutes of its 15–16 September meeting. They will explain how policymakers assessed inflation and growth risks at that time, but will not yet reflect their response to data released in October.
On 8 October, the ECB is scheduled to publish the account of its 9–10 September monetary policy meeting. How were energy inflation risks and economic resilience assessed at the time? This will explain an earlier decision, not set interest rates anew.
On 8 October, Federal Reserve Governor Christopher Waller is due to speak about the economic outlook. His assessment of slower growth alongside continuing price increases will be particularly relevant.
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.
