Weekly Market Recap

The UK

UK equities faced additional pressure from domestic fiscal uncertainty. Reports that the government was considering measures including windfall taxes on banks and energy companies weighed on financials. 

On the data front, new car registrations in the UK rose by 13.7% in August compared with the same period in 2025. This marked the ninth month of growth in a row.

Europe

Renewed hostilities between the US and Iran and attacks on oil tankers in the Strait of Hormuz raised concerns about disruption to global energy supplies. Brent crude prices rose as tensions escalated, while European natural gas prices also increased sharply. Energy stocks were relatively resilient, while higher fuel costs weighed on more economically sensitive areas of the market. 

The energy shock reinforced concerns that inflation could remain elevated for longer, contributing to a sharp increase in sovereign bond yields. German government bond yields moved higher alongside UK gilts, creating a challenging backdrop for equities and weighing on growth stocks, consumer sectors, and other rate-sensitive areas. Sentiment improved later in the week as the rise in oil and yields paused, helping European markets recover some of their earlier losses. 

Retail sales in the eurozone fell at their quickest pace since May 2025, declining 0.6% month on month (MoM) in July. Among the region's largest economies, Germany, Spain, and Italy saw declines in retail sales volumes, while France and the Netherlands posted gains. 

Eurozone producer prices rose sharply in July, up 1.6% from June. This was higher than expected and reflected a robust rise in energy-related costs. In contrast, the cost of capital goods rose by just 0.3% while costs for nondurable consumer goods fell.

China

China introduced measures to reduce risks associated with the property presale model and strengthen protections for homebuyers. Under the new framework, the main structure of a residential project generally must be topped out before presales can begin, while mortgages for presold homes can only be disbursed after project completion is registered; the accompanying credit measures also extend maximum development-loan maturities and raise the maximum term for personal housing loans from 30 to 40 years. Property shares fell sharply when markets reopened on Monday as investors assessed the implications for developer cash flows, with smaller developers among the weakest performers, before the sector recovered later in the week and participated in Hong Kong’s Friday rally. 

China’s official manufacturing PMI improved to 49.8 in August from 49.2 in July but remained below the 50 level separating expansion from contraction for a second consecutive month. Production and new orders returned to expansion, and new export orders also improved, while the official nonmanufacturing PMI remained at 49.0, its lowest level since December 2022. 

Private sector surveys were firmer. The RatingDog manufacturing PMI rose to 51.5 from 50.9, supported by stronger output and new orders and the fastest growth in new export business in six months, while the services PMI increased to 51.4 from 50.4 as stronger domestic demand supported new business; the composite PMI rose to 52.1 from 50.8. Taken together, the surveys pointed to improving activity in parts of the private economy, although the divergence between the official and private readings suggested that the broader recovery remained uneven rather than signalling a decisive acceleration in growth.

Japan

Rising Japanese government bond (JGB) yields and mounting expectations for near-term Bank of Japan (BoJ) monetary policy tightening weighed on highly valued growth stocks, while a sharp strengthening of the yen later in the week added pressure on exporters. Sentiment deteriorated further as renewed US-Iran tensions drove oil prices higher, although a rebound in technology shares and easing bond yields helped markets recover some ground by week's end.  

Investors’ focus was firmly on the BoJ’s 17-18 September monetary policy meeting, after Governor Kazuo Ueda signalled that policymakers would assess whether rising inflation risks warranted a near-term rate hike, reinforcing speculation that the central bank will raise its benchmark rate when it next meets. The yield on the 10-year JGB briefly exceeded 3.0% for the first time since 1996 amid higher oil prices, concerns about Japan’s fiscal outlook, and a broader global bond sell-off. Yields subsequently eased, with the 10-year JGB yield ending the week at around 2.9%. 

In the currency markets, the yen strengthened sharply against the US dollar on Wednesday and Thursday as expectations for a near-term BoJ rate hike increased. Speculation that policymakers could tighten more quickly than previously expected reinforced the moves. The yen traded around JPY 156 against the US dollar on Friday, markedly stronger than the prior week’s JPY 159 level. Market participants largely attributed the move to shifting rate expectations rather than official intervention. Finance Minister Satsuki Katayama nevertheless reiterated that authorities have maintained the same sense of urgency ever since the coordinated US-Japan intervention to support the yen in late July. 

In the week’s economic data developments, Japan’s household spending contracted 3.6% year over year (YoY) in July, more sharply than the 1.6% decline anticipated by consensus and following a 3.3% fall in June. The reading underscored persistent weakness in consumer demand, with spending on food, utilities, and transport and communication falling further. Separate data showed that industrial output grew for the second consecutive month, rising 4.1% YoY in July after a 4.9% rise in June.

Australia

Australia's second quarter 2026 GDP expanded 0.4% Quarter-over-Quarter (QoQ) versus consensus 0.3%, accelerating from 0.3% QoQ in the first quarter of 2026. On an annual basis, the economy grew 2.1% YoY, beating the median estimate of 1.8%. Household spending rose 0.4% QoQ (1.8% YoY), and net trade contributed 0.1% to growth. The household savings ratio stood at 6.5%. National house prices fell 0.9% MoM in August, extending the downturn to a fifth consecutive month and leaving prices 3.6% below peak. Residential building approvals fell 3.6% MoM in July, broadly in line with expectations, and partly retraced the 7.4% MoM increase recorded in June. Compositionally, the decline was broad-based.

Canada

US-Canada trade talks collapsed in late August after disagreements over deal terms, prompting the US to impose a 50% tariff on hundreds of Canadian goods and President Trump to threaten doubling auto tariffs to 50% effective 1 January. In response, Prime Minister Carney signalled retaliatory measures and extended a fuel excise tax suspension through January 2027 to cushion consumers from elevated energy costs linked to the Iran conflict.

The Bank of Canada held its overnight rate at 2.25% for a seventh consecutive meeting, but Governor Macklem struck a notably hawkish tone, flagging fresh inflation risks from the trade escalation and the Iran war, comments that pushed Canadian bond yields higher and briefly strengthened the CAD. Second quarter GDP grew at a solid 3.3% annualised pace driven by exports and investment, but July's trade surplus narrowed sharply to CAD 769 million from CAD 4.2 billion in June as US-bound exports fell 6.6% — their steepest monthly drop since April 2025 — and August services and composite PMIs fell to their lowest levels since early 2026, marking a third consecutive month of contraction.