Key Takeaways
- Rio Tinto (RIO) reported its smallest first-half underlying profit in five years at $4.81 billion, a 16% decline year-over-year, primarily due to weak iron ore prices and rising costs.
- Germany's GDP contracted by 0.1% in the second quarter of 2025, following a revised 0.3% growth in Q1, signaling a slowdown in Europe's largest economy.
- The Eurozone's GDP grew by a modest 0.1% quarter-over-quarter in Q2 2025, a significant slowdown from the 0.6% growth in the previous quarter, indicating broader economic deceleration across the bloc.
- Germany's government has officially approved its 2026 budget and a mid-term financial plan, featuring record investments of €126.7 billion and borrowing of €174.3 billion, marking a shift towards a high-debt, high-growth strategy.
Global economic indicators and geopolitical developments are painting a complex picture for financial markets, with major economies experiencing slowdowns while a key mining giant faces profit declines. Meanwhile, Germany is embarking on a significant fiscal shift to stimulate its economy.
Rio Tinto (RIO), a leading global mining company, announced its weakest first-half underlying profit since 2020, with earnings falling 16% to $4.81 billion for the six months ended June 30. This decline was largely attributed to weak iron ore prices, which eased due to oversupply concerns and slowing demand from China, the world's top steel producer. The company also noted rising unit costs at its Pilbara iron ore operations in Western Australia, which increased to $24.3 per wet metric ton (wmt) from $23.2 per wmt last year, partly due to cyclones. Despite these challenges, Rio Tinto's outgoing CEO Jakob Stausholm described the results as "very resilient" given market headwinds, highlighting stronger contributions from copper and aluminum operations. The miner declared an interim dividend of $1.48 per share, down from $1.77 per share last year.
Economic growth in Europe is showing signs of deceleration. Germany's gross domestic product (GDP) for the second quarter of 2025 saw a contraction of 0.1% compared to the previous quarter, according to the German Federal Statistical Office. This follows a revised 0.3% expansion in the first quarter. The slowdown was influenced by lower investment in machinery and equipment, as well as construction, and a decrease in demand from the United States.
Similarly, the Eurozone's economy expanded by a modest 0.1% quarter-over-quarter in the second quarter of 2025, falling short of the 0.6% growth recorded in the first quarter. On an annual basis, Eurozone GDP grew by 1.4%, slightly above expectations but still below the 1.5% growth of the prior quarter. This sluggish growth comes as the region faces the prospect of new U.S. import tariffs, with a 15% tariff set to be imposed on most EU goods next month.
In a notable shift in fiscal policy, Germany's government has officially approved its 2026 budget along with a mid-term financial plan extending to 2029. The draft budget includes record investments of €126.7 billion and borrowing of €174.3 billion. This marks a departure from decades of fiscal conservatism, aiming to revive economic growth, modernize infrastructure, and increase military spending. The plan involves a special €500 billion infrastructure fund and an exemption from debt rules for defense spending, allowing for increased borrowing. Total defense spending is projected to rise from €95.1 billion in 2025 to €161.8 billion by 2029, with a target to reach 3.5% of GDP.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.