The August decision signals the authorities’ willingness to cautiously reduce rates after previously holding the benchmark at 5.75% in July 2026. While the cut is modest, it underscores an ongoing shift toward a less restrictive policy stance as conditions allow, with markets likely to watch closely for any indication of the pace and scope of further easing in the months ahead.

Indian equities continued to draw overseas interest, with foreign investors having purchased more than $2.5 billion in domestic stocks so far this month. Market participants now look ahead to Nvidia’s earnings report on Wednesday and Fed Chair Kevin Warsh’s speech at Jackson Hole on Friday for further signals on the monetary policy outlook.

IndiGo was the top gainer on the index, advancing 2.1%, followed by Adani Ports, Infosys, Trent, Titan, SBI, Mahindra & Mahindra, Tech Mahindra and L&T, which rose between 0.8% and 1.2%. On the downside, Eternal (-0.9%), HCL Tech (-0.7%) and Power Grid (-0.5%) were the session’s biggest laggards.

The decline suggests a deterioration in household sentiment after July’s stronger reading, with the index remaining below the 100-point threshold that typically separates pessimism from optimism. The latest figures indicate that Brazilian consumers are more cautious about current conditions and the short-term outlook as the third quarter of 2026 gets under way.

Average hourly earnings also recorded solid annual growth, rising 3.8% to EUR 31.96, with increases seen across all 13 sectors. Meanwhile, average weekly paid hours inched up by 0.3%, from 32.7 hours in Q2 2025 to 32.8 hours in Q2 2026.

Exports climbed 13.5% to EUR 1.43 billion, supported by stronger shipments of manufactured goods classified chiefly by material (19.2%), transport equipment (8.8%), and miscellaneous manufactured articles (35.4%). Export growth was strongest toward Germany (7.6%), France (10.3%), and Belgium (9.7%).

Over the January–June period, the trade deficit widened to EUR 4.35 billion from EUR 4.26 billion in the same period a year earlier.

Market participants remain uncertain whether the U.S. measures will hasten or delay a potential resolution to the U.S.–Iran standoff and the full reopening of the Strait of Hormuz. At the same time, risks to energy supplies in the Middle East remain elevated. The UK Navy reported that an oil tanker was struck and disabled near Oman, while Iran-backed Houthi militants claimed they had fired on a Saudi Arabian supertanker transiting the Red Sea.

At the same time, the market is grappling with heightened uncertainty over shipments through the Strait of Hormuz, a critical corridor for global LNG trade. Flows through the strait have been disrupted since an Iranian attack in July on a Qatari-owned tanker, raising doubts about the reliability of Middle Eastern supplies to Asia. These concerns are being compounded by ongoing US efforts to intensify economic pressure on Tehran.

The disruption is particularly significant for Japan and South Korea, which depend heavily on LNG imports to meet their energy needs, leaving both countries especially exposed to any further instability in Middle Eastern supply routes.

While the change is incremental, the higher yield suggests investors are demanding a bit more compensation to hold short-dated German government paper. This can reflect shifting expectations around short-term interest rates or inflation within the euro area, both of which play a central role in pricing front-end government bonds.

The updated auction result, recorded on 25 August 2026, will be closely watched by market participants who use the Schatz yield as a key reference point for assessing risk-free rates and for pricing a wide range of financial instruments across Europe.

Inflation also eased in several categories, including alcoholic beverages and tobacco (3.0% vs. 3.4%), transport (13.0% vs. 17.5%), communication (3.1% vs. 3.2%), restaurants and hotels (4.8% vs. 4.9%), and miscellaneous goods and services (1.7% vs. 2.8%).

In contrast, prices rose more rapidly for housing and utilities (10.7% vs. 10.5%), furnishings, household equipment and routine maintenance (2.7% vs. 1.1%), health (5.9% vs. 5.7%), and recreation and culture (3.6% vs. 3.0%), while education costs were stable at 1.8%.

On a monthly basis, consumer prices fell by 0.4% in July, following a 1.1% decline in June.

At the same time, London Metal Exchange-registered inventories have dropped sharply, while physical availability in key markets outside China remains especially tight. On the demand side, zinc has found additional support from a modest rebound in manufacturing activity in both Europe and the United States. In contrast, Chinese inventories have increased substantially, underscoring a clear divergence between the world’s largest consumer and other regions.

Stocks of finished products increased to 5 from 3, and current production levels remained unchanged at 5. The deterioration in export order books became slightly less pronounced, with the balance improving to -16 from -18, and overall order books strengthened to -13 from -15.

Labour market indicators were more positive: expected employment edged up to 9 from 8, and the labour hoarding indicator rose to 7 from 5, suggesting firms remain inclined to retain workers despite weaker sentiment.

Outside manufacturing, confidence improved in both retail trade and services, and remained unchanged in construction. All these sectors continued to stand above their long-term averages.

Exports fell sharply for professional, scientific and controlling instruments and apparatus (-10.2% vs +18.1% in June) and for machinery specialized for particular industries (-8.8% vs +4.1%). By contrast, shipments of office machines and automatic data processing machines accelerated markedly, rising 106.5% year-on-year compared with 93.2% in June.

By destination, exports to Asia grew 54.6%, driven largely by robust demand from Mainland China (56.5%). Exports to other major markets also posted strong gains, including the United States (92.9%) and Mexico (48.9%).

Imports increased 41% to $677.4 billion, supported by higher purchases of electrical machinery, apparatus and appliances, and electrical parts thereof (up 47.1%), office machines and automatic data processing machines (up 78.9%), and non-ferrous metals (up 242.5%). Import growth was particularly pronounced from Mainland China (up 37.1%), South Korea (up 146.6%) and India (up 110.7%). Over the first seven months of 2026, Hong Kong’s cumulative trade deficit reached $299.4 billion.

By origin, the sharpest gains in imports were recorded from South Korea (up 146.6%) and India (up 110.7%), followed by the United Kingdom (up 106.3%), Malaysia (up 66.7%), the United States (up 62.6%) and Mainland China (up 37.1%).

Over the first seven months of 2026, total imports grew 40.6% year-on-year. The increase was mainly driven by electrical machinery, apparatus and appliances, and electrical parts thereof (up 47%), telecommunications and sound-recording and reproducing apparatus and equipment (up 62.2%), and non-ferrous metals (up 205.2%).

Overnight stays increased by 8.9% to 3.256 million, with most tourists staying in mountain resorts (up 13.8%), urban municipalities (10.5%), the capital (7.5%), and other municipalities (9.4%).

Over the January–July period, total tourist arrivals grew by 6.6% year-on-year to 4.1046 million, while overnight stays rose by 6.6% to 10.5412 million.

The latest figures, updated on 25 August 2026, indicate a substantial month-on-month narrowing of the external gap. While the trade balance remains in negative territory, the sharp reduction in the deficit suggests a notable shift in the city’s trade dynamics between June and July, which will be closely watched by markets and policymakers monitoring Hong Kong’s external sector performance.

The figures show that while imports continued to rise strongly in July, the rate of increase slowed compared with June, when the month-on-month growth reached 45.4%. The current reading of 41.0% reflects a still-elevated but slightly cooler momentum, as July’s performance is measured against June, and June’s was measured against May. This shift suggests a gradual tempering in import dynamics after a particularly rapid expansion earlier in the summer.

The July reading suggests that while exports are still expanding, the pace of growth has moderated from the stronger momentum seen in June. The shift from 53.4% to 50.7% indicates a cooling trend after a previously more robust month‑to‑month rise in external shipments, highlighting potential headwinds or normalization in trade flows following earlier gains.

In contrast, sales strengthened across a range of specialized-store categories. Fuel and related products posted a 12.2% increase (vs. 12% in June), while food, beverages, and tobacco grew 4.9% (vs. 4.4%). Household appliances and goods advanced 6.9% (vs. 4.7%), pharmaceutical and medical goods and cosmetics climbed 7.6% (vs. 2.6%), cultural and recreation goods rose 5% (vs. 4.2%), and construction materials increased 6.8% (vs. 5%). Sales at general merchandise stores also picked up, growing 6.9% compared with 5.2% in June.

On a month-on-month basis, retail sales declined 0.7% in July, reversing the 1.1% gain recorded in June.

Overall industrial activity was further supported by a rebound in mining and quarrying (0.83% vs. -10.79%) and a pickup in electricity and gas supply (5.8% vs. 1.54%). However, output in water supply declined (-1.3% vs. 1.45%). On a seasonally adjusted month-on-month basis, industrial production increased 4.15% in July, up from 2.41% in June, marking its strongest performance since February.

Chipmakers attempted to recover from Monday’s losses as investors positioned themselves ahead of Nvidia’s earnings release. Infineon Technologies led the advance, gaining more than 2% alongside other AI-related stocks. Siemens Energy rose 1.4%, helped by reports that it has mandated Goldman Sachs to explore a possible sale of its majority stake in its steam turbine business.

On the downside, Siemens Healthineers fell 1.1%, while SAP and Volkswagen declined 1.1% and 0.7%, respectively, ranking among the session’s worst performers.