Global Markets Weekly Update

U.S.

Major U.S. stock indexes finished the week narrowly mixed as investors weighed renewed U.S.-Iran hostilities, rising oil prices, a better-than-expected jobs report, and shifting Federal Reserve monetary policy expectations. The Dow Jones Industrial Average lost 0.27%, while the Nasdaq Composite added 0.40%. The S&P 500, Russell 2000, and S&P MidCap 400 Indexes were little changed. 

As measured by Russell 1000 indexes, growth stocks outperformed their value counterparts by the widest margin in a month. Within the S&P 500, the energy sector posted the strongest gains as oil prices rose amid renewed Middle East tensions.  

Oil prices and Treasury yields increase amid U.S.-Iran hostilities 

Geopolitical developments were a notable driver of sentiment early in the week after the U.S. and Iran exchanged strikes near the Strait of Hormuz for the first time in several weeks. Oil prices rose sharply on Monday and Tuesday as concerns about potential supply disruptions resurfaced, contributing to renewed worries about inflation and the path of Federal Reserve policy. 

Treasury yields moved higher alongside oil prices, with the benchmark 10-year U.S. Treasury note yield reaching roughly 4.82% intraday on Wednesday before retracing somewhat on Thursday after Fed Governor Christopher Waller said he would be inclined to keep rates unchanged if incoming data confirm that disinflation is continuing. However, yields across most maturities resumed their upward climb after Friday’s better-than-expected jobs report appeared to increase expectations for a near-term Fed rate hike. .

August job growth beats expectations; June and July revised higher 

The Labor Department reported Friday morning that U.S. employers added 162,000 jobs in August, well above estimates for around 55,000 and up sharply from July’s upwardly revised gain of 21,000. June's figure was also revised higher, leaving employment gains for June and July a combined 55,000 above previous estimates. The unemployment rate held steady at 4.1%, while the labor force participation rate rose to 61.6% from 61.4%. 

Other labor market data during the week were somewhat mixed. The Labor Department reported that job openings totaled 7.27 million in July, edging higher from June’s 7.18 million but falling short of estimates for around 7.35 million. Private payrolls firm ADP also reported that private employers added just 38,000 jobs in August, the lowest monthly figure since January. Meanwhile, initial jobless claims for the week ended August 29 came in at 206,000, little changed from the prior week’s revised 204,000. 

PMI surveys show resilient activity and persistent price pressures 

Business activity data continued to point to economic expansion in August. The Institute for Supply Management's (ISM's) manufacturing Purchasing Managers' Index (PMI) came in at 54.6 versus 55.6 in July, registering expansion for the eighth straight month but falling short of estimates for 55.4. New orders, production, and employment all remained in expansion territory, while the prices index was unchanged at 71.1, indicating raw materials prices rose for the 23rd month in a row.  

The ISM services PMI also showed expanding activity in August, rising 1.3 percentage points from July to 55.4. New orders and order backlogs improved, while the prices paid component climbed to its highest level in four years. 

Europe

The pan-European STOXX Europe 600 Index ended the week down 0.81% in local currency terms. European equities came under pressure early in the week as renewed U.S.-Iran hostilities pushed oil and natural gas prices higher, fueling concerns about inflation and driving up government bond yields. Risk sentiment subsequently stabilized as energy prices backed off their highs and rate concerns moderated. Technology stocks, meanwhile, benefited from renewed enthusiasm around artificial intelligence (AI). Among major stock indexes, Germany’s DAX closed 1.97% lower, France’s CAC 40 Index declined 1.46%, and Italy’s FTSE MIB fell 0.98%. The UK’s FTSE 100 Index was roughly flat. 

Middle East tensions push energy prices higher

Renewed hostilities between the U.S. and Iran and attacks on oil tankers in the Strait of Hormuz raised concerns about disruption to global energy supplies. The price of Brent crude oil 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. 

Higher energy prices put pressure on bond markets 

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. 

Sharp drop in European retail sales

Retail sales in the eurozone fell at their quickest pace since May 2025, declining 0.6% month on month in July. Among the largest economies in the region, Germany, Spain, and Italy experienced declines in retail sales volumes; France and the Netherlands saw growth in retail sales. 

Producer price inflation surprises

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.

UK markets contend with fiscal and rate concerns 

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. 

Japan

Japan’s stock markets fell over the week, with the Nikkei 225 Index declining 2.09% and the broader TOPIX down 1.05%. 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 U.S.-Iran tensions drove oil prices higher, although a rebound in technology shares and easing bond yields helped markets recover some ground by the end of the week.  

JGB yield reaches highest level since 1996

Investors’ focus was firmly on the BoJ’s September 17–18 monetary policy meeting, after Governor Kazuo Ueda signaled 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 U.S. dollar on Wednesday and Thursday as expectations for a near-term BoJ rate hike increased. The moves were reinforced by speculation that policymakers could tighten more quickly than previously anticipated. The yen traded around JPY 156 against the U.S. 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 U.S.-Japan intervention to support the yen in late July. 

Household spending shrinks amid weak consumer demand 

In the week’s economic data developments, Japan’s household spending contracted 3.6% year over year 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% year over year in July after a 4.9% rise in June. 

China

China equities diverged during the week as fading momentum in AI-related shares weighed on mainland benchmarks, while Hong Kong recovered sharply on Friday. The CSI 300 Index fell 1.33% and the Shanghai Composite Index declined 0.56%, while the Hang Seng Index rose 0.26% in local currency terms, according to FactSet. On the mainland, a midweek rise in oil prices and global bond yields amplified selling in semiconductors and other AI-related growth shares, while more traditional areas of the market, including consumer staples, agriculture, and media, held up relatively better. Hong Kong reversed earlier weakness with a 1.74% rally on Friday, led by technology, consumer, and property shares after comments from U.S. Federal Reserve Governor Christopher Waller eased concerns about a near-term U.S. interest rate increase, lifting the Hang Seng into positive territory for the week. 

China tightens property presale rules 

China introduced measures aimed at reducing risks associated with the property presale model and strengthening 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. 

Business surveys point to pockets of resilience in an uneven economy 

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 signaling a decisive acceleration in growth. 

Other key markets

Brazil

Growth beats expectations as election uncertainty builds

Brazil’s economy expanded more than expected in the second quarter, although the data also pointed to a loss of momentum as high interest rates continued to weigh on domestic activity. The stronger-than-forecast result underscored the economy’s resilience, but economists cited in the report cautioned that growth is likely to slow further as restrictive monetary conditions increasingly filter through to households and businesses. 

Political uncertainty also remained in focus as recent opinion polls suggested that President Luiz Inácio Lula da Silva’s advantage ahead of the 2026 presidential election has narrowed. The tightening race has increased attention on the potential direction of fiscal and economic policy after the election given ongoing concerns about Brazil’s public finances and the next administration’s commitment to fiscal discipline. 

Senegal 

IMF agreement accompanied by plans to restructure Senegal’s debt 

Senegal’s international bonds fell sharply at the beginning of the week after the government reached a preliminary agreement for a new International Monetary Fund (IMF) program while also announcing plans to restructure its debt. The restructuring follows the discovery in 2024 of billions of dollars of previously undisclosed government borrowing, which sharply increased the country’s reported debt burden and led the IMF to suspend an earlier support program. With debt subsequently estimated at well above 100% of gross domestic product and market access deteriorating, Senegal agreed to pursue debt treatment as part of a new three-year IMF financing package worth about USD 2.2 billion. 

Senegal plans to pursue an enhanced version of the Group of 20’s Common Framework while excluding CFA franc-denominated obligations issued in the regional market, concentrating more of the adjustment on holders of international debt. Investor concern centered on how the restructuring will affect external creditors as investors assessed the potential scale of losses and the treatment of near-term payments.