10th August 2026

U.S.

Stock Market Performance:

• Major U.S. indexes advanced, with several reaching record highs as favourable earnings, renewed AI enthusiasm and optimism over a potential reopening of the Strait of Hormuz boosted sentiment.

• The Nasdaq Composite led gains with its best week since April, followed by the S&P 500 and Russell 2000, while the Dow Jones Industrial Average gained nearly 3%.

• Hopes of reopening the Strait initially drove oil prices and Treasury yields lower, although optimism eased after reports suggested U.S. and Israeli vessels could face restrictions.

Labour Market:

• U.S. employers shed 23,000 jobs in July versus expectations for an 80,000 increase, the weakest result since February, while June and May gains were revised down to 20,000 and 63,000 respectively.

• The unemployment rate unexpectedly fell to 4.1%, while job openings declined to 7.359 million in June and ADP private payrolls increased by just 44,000 in July.

• Weekly unemployment claims remained subdued, suggesting layoffs have not accelerated significantly despite weaker hiring.

• Following the payroll report, the probability of a September rate hike fell to around 42% from approximately 55%.

Business Activity:

• The ISM Manufacturing PMI rose to 55.6 in July from 53.3, its highest since May 2022, with stronger new orders and production and employment expanding for the first time in 33 months.

• The ISM Services PMI remained expansionary at 54.1, although employment contracted and the prices index rose to 70.3 from 67.7, highlighting persistent inflationary pressures.

Bond Markets:

• U.S. Treasuries gained as lower oil prices and weaker employment data pushed the 10-year Treasury yield down to around 4.64% from 4.74%.

• High-yield bonds outperformed Treasuries amid stronger risk appetite, limited new issuance, lower oil prices and optimism surrounding a potential U.S.-Iran agreement.

Europe

Stock Market Performance:

• The STOXX Europe 600 gained 1.70%, supported by improved risk appetite, resilient earnings and initial optimism surrounding the Strait of Hormuz.

• Germany's DAX rose 2.69%, France's CAC 40 gained 2.41% and Italy's FTSE MIB advanced 2.96%, while the UK's FTSE 100 increased 0.30%.

Eurozone Economic Activity:

• Eurozone Services PMI rose to 51.7 in July from 49.4, its highest in five months, supported by stronger employment and business confidence alongside easing selling-price pressures.

• France's Services PMI improved to 49.8 from 46.8 and Germany's to 49.8 from 48.6, although both remained marginally in contraction.

UK Economic Activity:

• UK Services PMI increased to 52.1 from 48.8, returning to expansion, while Manufacturing PMI edged higher to 52.8 from 52.5.

• Stronger demand and easing input costs supported activity, although services employment remained subdued and uncertainty over energy prices persisted.

Japan

Stock Market Performance:

• Japanese equities advanced, with the Nikkei 225 gaining 1.93% and the TOPIX rising 1.79%, as investors assessed recent currency intervention and the outlook for Bank of Japan (BoJ) policy.

Yen and Monetary Policy:

• The yen weakened beyond JPY 158 per U.S. dollar, reversing some of the nearly 5% gain generated by the previous week's intervention.

• Japan and the U.S. coordinated foreign exchange intervention for the first time in 15 years, with officials signalling further action could be taken if required.

• The 10-year Japanese government bond yield remained around 2.79%, supported by expectations of another BoJ rate increase, potentially as early as September.

Fiscal Policy:

• Japan's Cabinet approved plans to reduce the consumption tax on food to 1% from 8% for two years from April 2027, alongside benefit payments, raising concerns over the impact on already strained public finances.

Wages and Spending:

• Household spending fell 3.3% year on year in June versus expectations for a 0.9% increase, despite nominal wages rising 3.4% and real wages increasing 1.6%.

• The figures suggest improving household incomes have yet to translate into stronger consumer spending.

China

Stock Market Performance:

• Mainland Chinese equities advanced, with the Shanghai Composite rising 2.81% and CSI 300 gaining 2.32%, supported by technology and semiconductor shares.

• Hong Kong's Hang Seng Index fell 0.84%, pressured by financial and insurance shares following reports of new taxes on offshore insurance returns.

Economic Activity:

• China's Manufacturing PMI declined to 50.9 in July from 51.7, a four-month low, as production and new-order growth slowed, although export orders returned to expansion.

• Services PMI fell sharply to 50.4 from 54.1, its weakest since September 2024, while businesses' 12-month outlook dropped to its lowest since February 2020.

Offshore Insurance Taxation:

• Chinese authorities reportedly began applying a 20% tax to income from overseas insurance policies held by mainland residents, including dividends and interest on prepaid premiums.

• The move represents further regulatory tightening around outbound investments and cross-border capital flows.

Trade and U.S. Relations:

• Exports increased 23.9% year on year in July and imports rose 27.5%, with AI-related electronics and high-technology products continuing to support export growth.

• U.S.-China tensions increased as Washington imposed restrictions on humanoid robots, power inverters and 43 Chinese companies, while considering further controls on Chinese data-centre components.

• Beijing responded by tightening controls on U.S.-bound drone exports and imposing sanctions on several U.S. businesses.

Other Key Markets

India:

• Indian equities advanced, with the Sensex gaining 1.3% in U.S. dollar terms, supported by initially lower oil prices and a relatively dovish Reserve Bank of India (RBI) policy announcement.

• Government bond yields declined, while the rupee remained under pressure despite further RBI intervention.

• The RBI unanimously held its repo rate at 5.25% and maintained a neutral stance, indicating it would assess whether higher energy costs feed into broader inflation.

• The RBI lowered its fiscal-year inflation forecast to 5.0% from 5.1% and raised its GDP growth projection to 6.7% from 6.6%, prompting investors to reduce expectations for near-term tightening.

Mexico:

• Mexican markets focused on Banxico's interest rate decision and inflation data, with persistent core inflation continuing to influence expectations for future monetary policy.

• Banxico unanimously held its benchmark rate at 6.50% for a second consecutive meeting, extending the pause in its easing cycle.

• The central bank maintained its end-2026 headline and core inflation forecasts at 3.5% but delayed the expected return to its 3% target until the fourth quarter of 2027.

• Annual headline inflation slowed to 3.12% in July from 3.37%, its lowest since May 2020, while core inflation eased to 3.95% from 4.03%.

• Monthly headline and core prices increased 0.03% and 0.23% respectively, with persistent core inflation supporting Banxico's decision to keep rates unchanged.

PLEASE NOTE:

This content is for informational purposes only and should not be construed as investment advice or a specific recommendation to act on any investment. It is importnat to assess your own circumstances before making investment decisions. The views expressed are as of the date indicated and whilst we believe the information is from reliable sources, we do not guarantee it’s accuracy. Past performance is not indicative of future results, and all investments carry market risks, including the potential loss of the principal.