Highlights
U.S. equities ended the week broadly flat, with the major indexes showing only modest moves as investors balanced renewed U.S.-Iran tensions, higher oil prices, stronger-than-expected employment data and changing expectations for Federal Reserve policy. The Dow Jones Industrial Average shed 0.27%, while the Nasdaq Composite gained 0.38%. The S&P 500, Russell 2000, and S&P Midcap 400 were little changed. Geopolitical concerns dominated trading 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 jumped on Monday and Tuesday as investors worried about potential disruptions to global supplies, reviving inflation concerns and uncertainty over the Fed’s next policy move. The U.S. labour market delivered a significant upside surprise in August. According to the Labor Department, employers added 162,000 jobs during the month, far above forecasts of roughly 55,000 and substantially higher than July’s revised increase of 21,000. The unemployment rate remained unchanged at 4.1%, while labour-force participation improved to 61.6% from 61.4%. Other labour indicators were less impressive. Job openings increased slightly to 7.27 million in July from 7.18 million in June, but remained below expectations of approximately 7.35 million. On the macro front, U.S. business activity remained firmly in expansion territory in August. The ISM manufacturing PMI eased to 54.6 from 55.6 in July, remaining above the 50 threshold for an eighth consecutive month but falling short of expectations. The services sector strengthened, with the ISM services PMI rising 1.3 points to 55.4. Across the great Atlantic pond, European equities declined during the week as renewed U.S.-Iran tensions pushed oil and natural gas prices higher, raising concerns about inflation and contributing to rising government bond yields. The pan European Euro STOXX 600 was lower by 1.12% for the week. Energy companies proved relatively resilient, benefiting from higher commodity prices, while industries more sensitive to economic growth suffered from rising fuel costs. The increase in energy prices contributed to a sharp rise in European sovereign bond yields, including German Bunds and UK gilts. Fundamentally, Eurozone retail sales declined 0.6% month over month in July, marking their steepest drop since May 2025. Meanwhile, Eurozone producer prices jumped 1.6% in July from the previous month, exceeding expectations. The increase was largely driven by higher energy costs. UK stocks were also affected by concerns over government finances and potential tax changes. Reports that the government could introduce windfall taxes on banks and energy companies weighed particularly on financial stocks. Shifting focus to Asia, Japanese equities weakened significantly as higher oil prices, rising government bond yields, and expectations of tighter monetary policy encouraged a broader risk-off move. The Nikkei 225 fell 2.09%, while the TOPIX declined 1.05%. Growth and technology stocks came under pressure from rising bond yields, while the yen’s sharp appreciation later in the week created additional headwinds for exporters. Chinese equities produced mixed results as weakening momentum in AI-related stocks pressured mainland markets, while Hong Kong shares recovered toward the end of the week. The CSI 300 fell 1.33% and the Shanghai Composite declined 0.56%, while Hong Kong’s Hang Seng Index gained 0.26%.
Data Highlights
CAD BoC Interest Rate Decision stayed the same at 2.25%, in line with expectations. CAD Unemployment Rate (Aug) stayed the same at 6.4%, in line with expectations. USD Unemployment Rate (Aug) stayed the same at 4.1% as expected. USD Non-Farm Payrolls (Aug) rose from 21K to 162K, higher than the forecasted 56K. CHF Inflation Rate YoY (Aug) rose more than expected, up +40bps from 0.4% to 0.8% against consensus for a 0.5% print. CHF GDP Growth Rate YoY (Q2) rose more than expected, from 0.4% to 2.3% compared to an anticipated rise from 0.4% to 1.7%. EUR Inflation Rate YoY (Aug) rose +40bps, from 2.9% to 3.3%, as expected. EUR Core Inflation Rate YoY (Aug) fell more than expected, -10bps from 2.5% to 2.4%, analysts forecasted an unchanged print. EUR Unemployment Rate YoY (Jul) stayed the same at 6.4%; expectations were for a drop to 6.3%. EUR Retail Sales YoY (Jul) fell more than expected, -80bps from 1.4% to 0.6%, analysts forecasted a decrease, from 1.4% to 1.1%. AUD GDP Growth Rate YoY (Q2) fell -40bps from 2.5% to 2.1%, less than expected -70bps decrease, from 2.5% to 1.8%. NZD RBNZ Interest Rate rose +25bps, from 2.5% to 2.75%, in line with consensus.
Week Ahead
CHF Unemployment Rate (Aug) – Monday | CNY Inflation Rate YoY (Aug) – Wednesday | EUR ECB Interest Rate Decision – Thursday | USD Inflation Rate YoY (Aug), USD Core Inflation Rate YoY (Aug) – Friday
