2026 Weekly Update

Market update

The S&P 500 closed the week at 7’757.64, +3.58% higher. The Dow Jones closed at 54’036.93, +2.96%, with the Nasdaq higher by +5.19%. The volatility index VIX closed the week at 14.9, down from 15.99. The Euro Stoxx 600 rose +1.70%.

The 10-year UST closed at 4.65%, down from 4.73% a week before. The yield curve is upward sloping with the yield spread between the 3-month and 10-year UST at 84bps. US Corporate Bond spreads: Investment Grade spreads narrowed -2bps at 81bps and High Yield spreads narrowed -14bps at 310bps. German 10-year Bunds yield closed at +3.13% down from +3.21% a week before. In Europe, Corporate Investment Grade spreads narrowed -2bps at 89bps and High Yield narrowed -8bps at 311bps. 

The US Dollar Index (DXY) depreciated -0.38% last week and closed at 99.54. The Euro closed at 1.1559 (+0.28%); the Yen depreciated -0.23%, closing at 157.76 and the Swiss Franc depreciated -0.05%, closing at 0.8079. Gold closed at $4’341.56, appreciating +7.30%. Oil was lower, Brent closed at $83.55 (-7.29%) and WTI at $78.18 (-7.67%).

Macroeconomy

US jobs

On Friday, the July jobs report delivered a notably weak headline, with non-farm payrolls falling by -23,000 (well below the +95,000 consensus and the worst reading since February). Prior months were revised down a cumulative -103,000, with June cut to +20,000 from +57,000 and May to +63,000 from +129,000, marking a fourth consecutive month of deceleration. Private payrolls added just +30,000, and ADP had already flagged the softness earlier in the week at +44,000, the lowest since January, while JOLTS job openings declined to 7.36 million from 7.54 million in May. However, the picture is more nuanced beneath the surface: much of the weakness was concentrated in leisure & hospitality (-40,000) and local government education (-50,000), while goods-producing employment and construction posted their strongest gains in several months, and weekly claims remained subdued, suggesting layoffs have not broadly accelerated. The unemployment rate ticked down to 4.1% from 4.2%, though this reflected a decline in the participation rate rather than genuine labor market improvement, a distinction with hawkish implications. Markets adopted a "bad is good" response, with equities rallying and September Fed hike pricing falling to 44%, though the yield decline was modest particularly at the long end, reflecting the reality that inflation remains the dominant constraint on Fed policy rather than labor market conditions. Wednesday's CPI print now becomes the decisive near-term catalyst for Fed pricing.

Swiss data

Swiss CPI eased in July, with headline inflation slipping to 0.4% y-o-y, its softest reading since March, while monthly prices fell 0.1%, the first monthly decline in six months. Core inflation held steady at just 0.3%, keeping it closer to zero than to 1% and reinforcing concerns that Switzerland remains vulnerable to a return to deflation. The main drivers of softness were food, clothing and household goods, while housing and energy provided a partial offset. The persistently low inflation environment, combined with a strengthening franc that continues to exert downward pressure on import prices, leaves the SNB in a delicate position: higher global price pressures are currently providing some buffer against the need for immediate action, but the risk of deflation re-emerging remains the central bank's primary concern.

UK PMI

UK manufacturing activity continued to expand in July, with the S&P Global PMI coming in at 51.9, a four-month low and below the flash estimate of 52.8, though marking a ninth consecutive month above the 50 threshold. Output growth accelerated to its fastest pace in nearly two years and new orders expanded for an eighth consecutive month, pointing to underlying demand resilience. On the softer side, business optimism slipped to a three-month low as firms flagged concerns over global trade tensions, tax changes and regulatory uncertainty, while employment growth slowed to its weakest of the current recovery. 

Eurozone PMI

Eurozone Manufacturing PMI rose to 51.9 in July from 51.4 in June, its strongest reading since April and broadly in line with the flash estimate of 52.0. Output expanded at its fastest pace since March 2022, supported by the completion of backlogged orders, though the underlying demand picture remained mixed: new orders rose only marginally, and export orders declined again, while backlogs fell at their sharpest pace since January. Employment and purchasing activity continued to be trimmed, reflecting ongoing caution among manufacturers. On the inflation front, cost pressures eased to a five-month low, allowing factory gate price inflation to soften to its weakest since March. Business confidence improved to its highest since February, though it remained below its long-run average.

China data

China's July inflation data painted a picture of fading energy price pass-through and softening domestic momentum. Headline CPI slowed to 0.5% y-o-y, well below the 0.8% consensus and the 1.0% prior reading, while core CPI eased to 0.9% and food prices fell 1.5%. PPI likewise disappointed at 3.5%, down from 4.1% in June and its weakest in three months, reflecting retreating commodity costs against a backdrop of still-subdued domestic demand. Factory activity contracted in July according to the official PMI, with new orders weakening across both surveys, underscoring the broader loss of economic momentum. China's leadership has pledged to accelerate fiscal spending on infrastructure through year-end, though the transmission of such stimulus typically takes around a quarter to feed through, limiting the near-term growth impulse.

Highlights

Gold

Gold surged +7.30% last week, its best weekly performance since January, closing above $4,341. The rally was driven by a confluence of factors: the weak US jobs report reduced near-term rate hike expectations, a softer dollar provided tailwinds, and continued buying from central banks and Asian investors underpinned structural demand. Mounting concerns over US fiscal debt added a further safe-haven bid. With September Fed hike pricing now at 44%, Wednesday's CPI print is the next key catalyst for gold too.

Earnings

With 88% of S&P 500 companies having reported, Q2 earnings season is ending, and on a strong note: 86% have beaten EPS estimates and the blended earnings growth rate stands at 50.4%. All eleven sectors are reporting y-o-y revenue growth. Among last week's US highlights, SpaceX delivered a beat with revenue surging +92% to $7.8bn and adjusted EBITDA up +191% to $3.5bn, driven by AI revenue growth, though deeply negative free cash flow underscores the scale of capital being deployed. Honeywell cut its full-year organic growth outlook to +4 to 5% from +7 to 9%, a disappointing read given that this was the company's first release as a standalone entity. AMD guided Q3 revenue slightly above consensus but below more optimistic market expectations. In Europe, Novo Nordisk beat on revenue and profit and raised full-year guidance, while Siemens posted a record quarterly industrial profit of €3.5bn, up 25% y-o-y on strong AI and data center demand. The week ahead is lighter as the season winds down, with Cisco, Applied Materials and Super Micro Computer the main US names, while in Europe Alcon, IHG and Adyen are the highlights.

On rates

Rates rallied last week, with Treasuries posting their largest weekly declines since May, driven by a softer-than-expected US July jobs report that prompted significant dovish repricing of Fed expectations. The probability of a September hike fell to 44% from 72% the week before, pushing the 2-year yield down 9.6bps and the 10-year down 9.0bps. The fall in energy prices reinforced the move, reducing inflation expectations and supporting the view that the Fed may have more room to pause. US high yield credit spreads also tightened 15bps, their joint biggest weekly move since April. In Europe, the bond rally was similarly broad-based: the 10-year gilt fell 12.9bps, BTPs 12.0bps and Bunds 7.4bps, with the Euro 1-year inflation swap declining 13.1bps to 2.26%, reflecting the easing of energy-driven inflation fears. 

What to watch

• Monday: -
• Tuesday: US ADP Employment, NFIB Small Business Optimism; Australia RBA Policy Meeting; South Korea August 10-day Exports
• Wednesday: US CPI, Labor Earnings; Germany CPI (Final); India Exports
• Thursday: US Initial Jobless Claims, PPI; UK Q2 GDP; Eurozone Industrial Production
• Friday: US Retail Sales, University of Michigan Survey; France CPI (Final); Taiwan Q2 Flash GDP