Markets, Business & Tech Briefing: A Week That Ended in an A+, Crude's Biggest Run Since July, and Banks Priced Above Book

Euronext Lisbon is shut for the weekend, so this edition is a retrospective on the week that finished on Friday and a look at the three things that will be waiting when the screens come back on. The most important of them arrived after the closing bell and cannot be traded until Monday.

The Week Closed Before the Upgrade Landed

The PSI ended Friday at 9,388.77 points, down 12.73 points or 0.14%, a third consecutive daily fall. Over the five sessions the index lost about 0.45%, its first weekly decline after four consecutive weekly gains. It finished roughly 1.7% below the 9,550.72 high of its 52-week range, the bottom of which is 7,639.48.

Friday was a lesson in index weighting rather than in sentiment. Ten of the sixteen constituents rose and the index still fell, because the one that fell hardest is one of the largest. Galp Energia dropped 2.29% to 20.52 euros as crude eased in the session, and at about 13.9 billion euros of market capitalisation it outweighed the green names on its own. The other falls were smaller: CTT down 1.37% to 6.49 euros, EDP Renováveis down 0.45% to 13.14 euros, NOS down 0.44% to 4.936 euros, Teixeira Duarte down 0.21% to 0.482 euros and Banco Comercial Português down 0.09% to 1.1485 euros.

The gainers were led by Jerónimo Martins, up 1.22% to 18.23 euros, then Sonae up 0.50% to 2.025 euros, Semapa up 0.48% to 20.85 euros, Corticeira Amorim up 0.43% to 7.05 euros, EDP up 0.35% to 4.649 euros, Navigator up 0.31% to 3.252 euros, REN up 0.29% to 3.505 euros, Altri up 0.21% to 4.685 euros, Ibersol up 0.20% to 10.22 euros and Mota-Engil up 0.08% to 4.776 euros. On Friday's closing prices the top of the index is EDP at 19.45 billion euros, BCP at 17.00 billion, Galp at 13.93 billion, EDP Renováveis at 13.92 billion and Jerónimo Martins at 11.47 billion.

Then, at 5:03 in the afternoon New York time, which is a few minutes past ten at night in Lisbon and long after the market had emptied, Fitch Ratings lifted Portugal's long-term issuer default ratings to A+ from A, with the outlooks set at Stable. The agency's own summary reason was "Portugal's strengthened public finances, including a projected path of declining government debt and fiscal balances that are considerably stronger than peers". Our Friday briefing had it as the lead that had not yet landed. It has now, and Monday is the first session in which anybody can act on it.

Portugal Was Already Trading Like an A+ Borrower

The honest reading of the bond tape is that the upgrade confirmed a price that already existed. Portugal's ten-year yield closed the week at 3.67%, down about 3.6 basis points on Friday. The German Bund ended at 3.34%, which puts the Portuguese spread at roughly 33 basis points, the tightest end of a range it has held all summer.

Look sideways rather than at Germany and the point sharpens. Spain, which S&P already rates A+, closed at 3.77%, a full ten basis points wider than Portugal. Greece ended at 4.00%, Italy at 4.14% and France at 4.21%. Portugal is therefore financing itself about 47 basis points inside Italy and 54 inside France. That is not a market waiting to be told Portugal is an A+ credit; it is a market that has been treating it as one, and in Spain's case as slightly better than one, for months.

Across the rest of the Portuguese curve on Friday: three months at 2.61%, six months at 2.67%, one year at 2.80%, two years at 2.95%, three years at 3.01%, five years at 3.21%, seven years at 3.43%, twenty years at 4.19% and thirty years at 4.30%. The whole curve fell on the day, which was itself a change: the week's dominant story in global fixed income was the opposite, a broad sell-off driven by the inflation implications of a rising oil price.

The euro closed at 1.16143 against the dollar, down about a tenth of a percent on the session, with the European Central Bank's reference rate for the day at 1.1622. The Governing Council meets on 9 and 10 September in Berlin, with a further quarter-point rise to a 2.50% deposit rate fully priced.

What the upgrade changes in practice is narrower than the political reaction to it suggests. It lowers the risk weight Portuguese sovereign paper carries in some investment mandates and widens the pool of funds that can hold it, and it arrives while the debt ratio is falling: 92.9% of GDP in the second quarter on the Bank of Portugal's measure, against a Fitch forecast of 87.0% for the year as a whole on the Maastricht definition, and with Portugal already among the European Union's small handful of budget surpluses. What it does not obviously do is compress a spread that is already near its floor.

Crude Had Its Biggest Week Since July, and Saturday Added to It

Oil, not equities, was the week's real market. Brent futures for November delivery, the grade that prices most Portuguese imports, closed the week at above 96 dollars a barrel after a gain of about 7.9%, the biggest weekly rise since the week ended 24 July. West Texas Intermediate did better still, adding 9.69% to 91.48 dollars, its strongest week since 17 July. Both had fallen more than 5% the week before.

The driver is the seventh month of the war between the United States and Iran, and the supply disruption that comes with it. Claudio Galimberti, chief economist at Rystad Energy, told Reuters that the diesel channel is why the effect is showing up in bond markets rather than only at the pump: "every sector of the economy is affected by diesel. That is one of the reasons why US Treasury yields are so high: the expectation that inflation will keep rising." Average American diesel prices reached record levels during the week.

Saturday escalated it again. United States Central Command said its forces had permanently disabled two Iranian Revolutionary Guard tankers, the M/T Downy off Kharg Island and the M/T Stark 1 near Jask, and completely destroyed a third, the empty M/T Kylo, also known as the Noxen, in the Gulf of Oman, after ordering its crew off. CENTCOM described the strikes as retaliation for ballistic missiles fired by the Revolutionary Guard at two US Navy vessels patrolling near the Strait of Hormuz, and said no American personnel were hurt. Its commander, Brad Cooper, put it as a price list: "if you shoot at two of our ships, we will impose a greater economic cost and eliminate three of yours." Kharg Island is where Iran's main oil terminal sits.

The domestic consequence arrives on Monday morning. The government had been unwinding its fuel-tax discount through late August; on Friday it reversed course and deepened the rebate on the Imposto sobre os Produtos Petrolíferos (Tax on Petroleum Products) by about three cents a litre including VAT. Even so, diesel is expected to rise about 12 cents to around 2.12 euros a litre and petrol 95 about nine cents to around 2.10 euros. Prime Minister Luís Montenegro put the cumulative cost of the fuel support measures at roughly 700 million euros. For the index, the read-through runs two ways: Galp is the obvious beneficiary of a higher crude price, while TAP has already blamed fuel for a half-year loss of 99.2 million euros and fuel did almost all the work in taking August inflation back to 3.3%. OPEC and its partners meet on Sunday.

The Fórum para a Competitividade Reads a Good Year and Finds Four Problems

The Fórum para a Competitividade (Forum for Competitiveness) published its August conjuncture note on Friday, and it is the most useful macro document of the week precisely because it is not a cheerleading exercise. Its headline judgement is optimistic: "with first-half growth close to 2.5%, a great deal would have to go wrong, which is not the central scenario, for growth over the year as a whole to fall much below 2%." The association was warning about headwinds as recently as April, so the shift matters.

Beneath the headline it flags four things. First, productivity. The second-quarter unemployment rate fell from 6.1% to 5.3%, the lowest since the series began in 2011, with both the labour force and employment accelerating. The Fórum calls the "less positive aspect" the low productivity of the jobs being created: with employment rising faster than GDP, average productivity is falling, which "probably means we are creating low-productivity jobs". That is the same scissor the productivity data has been describing all year.

Second, the state as an employer. Public administration employment hit a new record of 768,000 in the second quarter, up 1% year on year and driven mainly by local government. In a period of labour shortage, the note says, it is "hard to understand that the public sector is competing with the private sector in this way".

Third, tourism. The National Statistics Institute's Tourism Satellite Account shows the sector's weight in GDP easing from 16.3% in 2023 to 16.2% in 2024 and 16.1% in 2025. The Fórum argues that this "calls into question the idea that GDP has grown with a great deal of help from tourism", and that on 2026's relatively modest numbers the sector may keep losing weight this year.

Fourth, investment. The second-quarter fall in investment is called "a little surprising" given that this is the closing phase of the Plano de Recuperação e Resiliência (Recovery and Resilience Plan), and the note observes that the decline is concentrated in "other machinery", which "suggests that the programme is not managing to drive the growth of the economy". It expects no great investment dynamism in the coming quarters, sees the third quarter losing pace after a very strong second, and treats the excellent second-quarter export numbers with caution given how volatile that series is. On the international picture, it says optimism about the second half "seems to have dissipated" with the renewed Middle East hostilities, notes that energy prices are still below the March to May peaks even though refined products are proving hard to bring down, and expects the ECB to raise rates in September.

A Banking Sector Priced Above Book, and Who Is Expected to Buy Next

The other weekend read worth the time is an interview ECO's legal title Advocatus published with Francisco Soares Machado, a partner in the financial and governance department at the law firm Sérvulo, who advised the vice-president of the European Investment Bank between 2015 and 2018 and worked in the Finance Ministry before that. It is a practitioner's map of where Portuguese bank ownership goes next.

His description of the sector's condition is straightforward: high capital and liquidity, historic profits and returns, low non-performing loans and low leverage, with several indicators above the European Union average or at the front of the euro area. The consequence he draws is the one that matters for the PSI. Bank valuations "have been rising consistently and exceeding book value, which for many years did not happen". Portuguese banks spent most of the last decade priced below the accounting value of their own assets. They are not any more.

On whether the returns are cyclical or structural, he answers "a bit of both", crediting the macro backdrop but insisting the larger share belongs to the banks themselves: deleveraging, asset quality, operating efficiency, digital transformation and internal controls, gains he expects to last. The challenges he lists are digital transformation, payment fraud, folding sustainability into internal risk models, and regulation, where he wants European agreement to complete the missing pillar of the Banking Union and reads the recent Commission and ECB moves on competitiveness, simplification and proportionality as positive.

The interesting part is the deal logic. High valuations, very high barriers to new banking licences and a supervisory preference for consolidation together create, in his words, opportunities "in closing positions and in long-term investment in banks". The examples he cites are the Fosun sale of a BCP holding at a large capital gain, the sale of Novo Banco to BPCE, and agreements to sell other, smaller banks. "It does not seem to me that we will stop here."

Two footnotes are worth adding to that. The completed Fosun disposal was the 5.6% block placed in January 2024 for a gain of about 176.6 million euros; the roughly 20% that the Chinese group still holds remains on offer rather than sold, which is the single largest open question on the Portuguese banking consolidation map. And the smaller-bank category is not a clean run of successes: Cajamar walked away from Banco CTT on Friday, and the ECB pulled Banco Empresas Montepio's licence in August. He is on firmer ground with alternative asset management, where the number of managers has grown exponentially on low entry barriers and an attractive tax regime, and where he expects consolidation through mergers and acquisitions to follow.

Also This Weekend: An Anthropic Prospectus, a Cybercab Audit, 100 Million Euros of Porto Parking

Anthropic lines up its banks. The company behind the Claude assistant is close to appointing Morgan Stanley and Goldman Sachs to the lead roles in its initial public offering, according to a Financial Times report carried by ECO, and could file its prospectus as early as this week. Morgan Stanley is expected to run the deal and the valuation discussions, with Goldman Sachs as stabilisation agent in the first sessions of trading, and JPMorgan, Citigroup and Barclays also taking significant roles. Investors anticipate a valuation of at least two trillion dollars, with a roadshow late in September and a New York debut at the end of that month or the beginning of October. The timetable can still move.

The Cybercab is being audited from day one. The United States National Highway Traffic Safety Administration opened an investigation into Tesla's Cybercab on the first day of its commercial launch, to establish "the process and technical data on which Tesla relied to certify the Cybercab and the problems inherent in it". Federal rules require a steering wheel and pedals for any commercial operation unless the manufacturer obtains an exemption, of the kind Amazon's Zoox secured at the end of July. A source told Agence France-Presse that Tesla did not apply for one. Tesla says it notified the agency that it had self-certified compliance with all Federal Motor Vehicle Safety Standards; the regulator replied that when self-certified vehicles do not appear to meet federal rules, it investigates.

Porto puts a number on illegal parking. The diagnosis in the city's Plano de Mobilidade Urbana Sustentável (Sustainable Urban Mobility Plan), seen by Lusa, estimates that Porto forgoes at least 100 million euros a year in potential revenue because of illegal parking, on what it calls a conservative view. The Municipal Police tow about 15,000 vehicles a year, an average of five per tow truck per day, and roughly 85 kilometres of streets, some 12% of the city's network, see frequent illegal parking. Double parking, pavements, crossings and bus lanes are the commonest cases, and school gates at drop-off and pick-up are singled out. The plan goes to Tuesday's council meeting for a vote on sending it to public consultation, and follows a year in which the city's parking fines climbed toward 300 a day.

Monday

OPEC and its partners meet on Sunday, so crude will have an answer to price before Lisbon opens. The first real test is in the bond market rather than in equities: whether an A+ rating buys Portugal anything at all when its spread to Germany is already about 33 basis points and it already trades inside Spain, which has carried that rating for some time. Watch Galp, which cuts both ways on a higher oil price, and the banks, which have spent the week getting cheaper funding on paper and more expensive funding in fact. The pumps reprice on Monday morning, and the European Central Bank meets on Wednesday and Thursday.