Global Markets Weekly Update

U.S.

Major U.S. equity indexes finished the week lower as elevated Treasury yields, renewed U.S.-Iran tensions, higher oil prices, and weakness in semiconductor and artificial intelligence (AI)-related shares broadly weighed on investor sentiment. Mixed takeaways from several retail earnings reports also appeared to contribute to the week’s cautious tone. The S&P MidCap 400 Index led declines, dropping 2.46%, while the Nasdaq Composite and Russell 2000 Index shed 2.05% and 1.65%, respectively. The Dow Jones Industrial Average held up best, falling 0.85%.

Treasuries slide; Fed minutes highlight uncertainty over inflation outlook  

Long-term U.S. Treasury yields rose early in the week, with the yield on the 30-year U.S. Treasury bond reaching its highest level since 2007. Rising concerns around the U.S. fiscal outlook and heavy government and corporate debt issuance—including financing tied to AI capital spending—appeared to contribute to the sell-off. (Bond prices and yields move in opposite directions.) Higher oil prices amid renewed tensions between the U.S. and Iran also added to inflation concerns.  

Treasuries rallied on Wednesday after the Treasury Department announced that it would at least double the size of its planned long-term debt buybacks. However, much of the move reversed late in the week as investors appeared to question whether the program would be sufficient to offset the pressures weighing on longer-term bonds. 

Meanwhile, minutes from the Fed’s July meeting indicated that meeting participants generally expected inflation to moderate through the remainder of the year, though they acknowledged “that their inflation outlooks were highly uncertain and that inflation risks were skewed to the upside,” and “policy tightening would likely be necessary if inflation did not decline.” 

Business activity accelerates in August 

Data released Friday morning indicated that U.S. business activity accelerated sharply in August. The S&P Global Flash Composite Purchasing Managers’ Index (PMI) rose to 56.0 from 54.5 in July, its highest level since April 2022. Strength was concentrated in services, where the PMI jumped to 56.8 from 54.6, while the manufacturing PMI eased to 53.2 from 53.9. 

The survey also indicated that employment increased at its fastest pace since January 2025 as business confidence improved. Price pressures moderated, with selling-price inflation slowing notably, although input costs remained elevated amid higher energy prices. 

Elsewhere, the Empire State Manufacturing Index and Philadelphia Fed Manufacturing Index both came in ahead of consensus estimates for August, reaching their highest levels since 2021.  

Housing market remains sluggish amid elevated rates and high prices 

Several reports on the housing market highlighted ongoing weakness in the sector. The National Association of Realtors reported that pending home sales dropped 2.3% from the prior month in July, falling to the lowest level since January, while Census Bureau data showed that housing starts declined more than 12% from June to a seasonally adjusted annual rate of 1.239 million.  

The National Association of Home Builders also reported that its Housing Market Index—a measure of homebuilder confidence—edged up one point but remained subdued amid “economic and geopolitical uncertainty, elevated mortgage rates, and rising construction costs.” Meanwhile, data from Freddie Mac showed that the average rate on a 30-year fixed rate mortgage was 6.65% for the week, down from 6.67% in the prior week but above the 6.58% average seen a year ago. 

Europe

The pan-European STOXX Europe 600 Index ended the week down 0.56% in local currency terms. Investors were unnerved by the sell-off in global government bonds, inflationary pressures, and uncertainty about whether the U.S. and Iran can reach a lasting peace agreement. Among major stock indexes, Germany’s DAX closed 1.15% lower, France’s CAC 40 Index fell 1.76%, and Italy’s FTSE MIB declined 1.71%. The UK’s FTSE 100 Index bucked the downward trend, climbing 0.62%.

Eurozone activity improves in August 

The August reading of the eurozone flash composite PMI was 52.1, higher than both expectations and the 52 recorded in July. New orders in the eurozone increased, and export demand returned to growth for the first time in four and a half years. 

Manufacturing surges in Germany, offsetting weakness in services

The S&P Global Flash Composite PMI fell to 51.0 in August from 51.3 the previous month but remained in expansionary territory. The manufacturing sector showed signs that it has regained momentum, with the output index hitting a 55-month high. Services activity contracted for the fifth consecutive month.  

German economic confidence improves 

The ZEW Indicator of Economic Sentiment for Germany, which tracks investor expectations, climbed to 34.2 in August from 26.3 in July. Investor confidence improved on the back of corporate earnings, government infrastructure spending, and exports remaining fairly resilient.  

French industry confidence shows signs of strengthening 

The manufacturing business climate index in France rose by more than expected in August. At 103, this was the highest level in seven months and largely reflected a recovery in personal production prospects. The overall business climate index also improved over the previous month, with retail trade seeing the biggest gain. 

Signs of cooling in UK jobs market while inflation rises 

The number of payrolled employees in the UK fell by 13,000 in July, reflecting caution on the part of employers. This was the sixth consecutive month of decline. In other jobs data, the official unemployment rate in June held steady at 4.9%, higher than the 4.8% that had been expected. 

Meanwhile, official data showed that the country’s inflation rate rose to 2.9% in July, in line with expectations and reflecting the hike in the energy price cap by industry regulator, Ofgem.

Japan

Japan’s stock markets declined sharply over the week, as renewed Middle East uncertainty, higher oil prices, and rising bond yields prompted a broader risk-off move, with technology and semiconductor stocks particularly weak. The Nikkei 225 Index fell 3.93%, while the broader TOPIX Index was down 3.10%. The yen fluctuated around the JPY 159 level against the U.S. dollar over the week and remained historically weak, with expectations for further Bank of Japan (BoJ) policy tightening balanced against elevated oil prices and the wide U.S.-Japan interest rate differential.  

Government bond yield reaches 30-year high before retreating 

In fixed income, the yield on the 10-year Japanese government bond (JGB) climbed to a 30-year high of around 2.93% early in the week amid expectations for further BoJ policy tightening and mounting fiscal concerns following the government’s recently announced plans to cut the consumption tax. Weaker-than-expected second-quarter gross domestic product (GDP) data provided some counterweight to these pressures. The JGB yield subsequently retreated before rising again on Friday, as firmer inflation data reinforced expectations for a near-term rate hike. It ended the week around 2.88%, broadly unchanged from the previous week. 

GDP growth slows, while inflation accelerates 

Japan’s economic growth unexpectedly slowed in the second quarter, with GDP expanding 1.1% on an annualized basis, short of consensus expectations for 2.0% growth and down from a revised 1.9% in the first three months of the year. The main drag came from capital expenditure, while private consumption was also weaker than expected, likely reflecting consumers’ reluctance to spend in an environment of rising living costs. Robust exports helped offset some of this domestic weakness. 

Consumer inflation accelerated for the second consecutive month in July, and at the fastest pace since January, strengthening the case for a near-term BoJ rate hike. The nationwide core consumer price index rose 1.8% year over year in July, in line with consensus and up from 1.6% in June. 

Meanwhile, Japan’s trade deficit widened sharply in July as imports surged 27.8% year over year, driven in large part by higher energy costs following the surge in crude oil prices. Exports remained robust, rising 23.2%, supported by strong shipments of automobiles and semiconductors and other electronic components. 

China

China equities diverged over the week, with Hong Kong-listed shares outperforming mainland benchmarks. Mounting worries about faltering economic momentum weighed on sentiment in the mainland as July data showed a broad slowdown in economic activity. The Shanghai Composite Index fell 0.56% while the CSI 300 Index slid 1.01% in local currency terms, according to FactSet. Notably, semiconductor and robotics names pulled back in tandem with other chip stocks globally, despite some positive earnings updates and the stellar performance of humanoid robotics company Unitree Robotics following its stock market debut. In contrast, Hong Kong’s Hang Seng Index advanced 3.55%, led by strength from health care stocks. 

Disappointing July activity data add to economic worries 

China’s economy began the second half of 2026 on a soft note as activity data moderated across the board in July. Industrial output grew 4.5% year over year, lagging expectations and falling from 5.3% in June despite continued resilience in production of high-tech products. Retail sales increased 0.6%, down from 1% in June, reflecting persistently sluggish domestic demand.  

Meanwhile, fixed asset investment slumped by 6.7% from a year earlier over the January to July period, deepening from the 5.7% contraction in the year to June. Although the disappointing data were partially attributed to disruptions caused by extreme weather conditions, the broad-based downturn may pressure policymakers to ramp up fiscal support to achieve the annual growth target. 

Property weakness persists as authorities increase support

China’s property sector continued to drag on economic activity, with real estate investment shrinking by 19.2% year over year through the first seven months, steepening from the 18% drop over the first half. At the same time, new home prices dipped by 0.1% in July from the prior month, matching June’s pace. That said, the rate of declines narrowed modestly on an annual basis. 

Against this backdrop, authorities continued to roll out supportive policies to stabilize sentiment. The State Council will allow residents to withdraw their Housing Provident Fund (HPF) savings for more purposes, such as renovations and management fee payments, starting September 20. In addition, contributors who use HPF savings to pay rent will no longer need to meet certain thresholds. Meanwhile, Shanghai further eased restrictions on homebuyers, lowering minimum down payment requirements for second-home purchases beyond the city’s outer ring road. 

Unitree Robotics surges on trading debut 

Shares of Hangzhou-based humanoid robot maker Unitree Robotics ended 460% higher on their trading debut in Shanghai on August 19. The stock initially rallied by over 600% before paring gains, giving the company a market value of CNY 342 billion based on its closing price on Wednesday. The initial public offering (IPO) was more than 8,000 times oversubscribed by retail investors, signaling strong interest toward “embodied AI” companies. Embodied AI refers to one of six future industries outlined in China’s latest five-year plan. It was the latest high-profile technology IPO in China, following memory chipmaker CXMT’s blockbuster listing on July 27. 

Other key markets

Indonesia

Bank Indonesia holds rate as rupiah strengthens

Indonesia's central bank left its benchmark interest rate unchanged this week, holding steady at 5.75%. The pause followed a period in which the bank had raised rates multiple times to counter sharp currency weakness, and this week's decision kept the companion deposit and lending facility rates unchanged as well. The rupiah has recovered from the record lows it reached earlier in the year and strengthened modestly in recent weeks. 

The currency's recovery has been supported in part by a broadly weaker U.S. dollar, which has eased pressure on emerging market currencies generally, including the rupiah. Indonesian government bond markets and equities have shown relative calm alongside the steadier currency, a contrast with the volatility seen earlier in the year when the rupiah's slide prompted the central bank to raise rates outside its normal policy schedule. The rate hold was consistent with policymakers’ efforts to preserve rupiah stability while keeping inflation within target and supporting economic growth. 

Brazil 

Foreign outflows and retail bankruptcy weigh on markets 

Brazilian equities faced a difficult stretch this month as foreign investors withdrew a substantial amount of money from stocks listed on the country's main exchange, marking one of the largest such pullbacks on record. The selling accelerated into this week, compounding a losing streak in the Ibovespa that had already been building on separate news that one of Brazil's best-known retailers filed for bankruptcy protection, citing billions of reais in outstanding debt. The filing also added to concerns surrounding Brazil's credit environment and weighed on bank shares, with several financial institutions listed among Casas Bahia's creditors. 

Adding to the uncertainty, Brazil's electoral court temporarily barred presidential candidate Pablo Marçal from participating in debates and accessing public campaign funds while it considers a challenge to his candidacy, a ruling that came just as the country's two leading candidates formally launched their campaigns ahead of the October vote. Some foreign investors have pointed to the approaching election as a key reason for reducing their exposure to Brazilian assets, alongside broader competition for capital from other markets. Despite the outflows, Brazilian stocks and the real recovered some ground later in the week, with equities snapping their losing streak and the currency strengthening against the dollar.