2026 Weekly Update

Market update

The S&P 500 closed the week at 7’785.76, +0.36% higher. The Dow Jones closed at 53’732.41, -0.56%, with the Nasdaq higher by +0.14%. The volatility index VIX closed the week at 14.25, down from 14.9. The Euro Stoxx 600 fell -0.36%. 

The 10-year UST closed at 4.69%, up from 4.65% a week before. The yield curve is upward sloping with the yield spread between the 3-month and 10-year UST at 90bps. US Corporate Bond spreads: Investment Grade spreads widened 1bp at 82bps and High Yield spreads widened 1bp at 311bps. German 10-year Bunds yield closed at +3.20% down from +3.13% a week before. In Europe, Corporate Investment Grade spreads stayed flat at 89bps and High Yield narrowed -1bp at 310bps. 

The US Dollar Index (DXY) appreciated +0.13% last week and closed at 99.67. The Euro closed at 1.157 (+0.10%); the Yen depreciated -0.99%, closing at 159.32 and the Swiss Franc depreciated -0.67%, closing at 0.8133. Gold closed at $4’376.4, appreciating +0.80%. Oil was higher, Brent closed at $88.52 (+5.95%) and WTI at $82.4 (+5.40%).

Macroeconomy

US prices

The July CPI was right in line with expectations on both headline (+0.1% m-o-m and +3.4% y-o-y) and core (+0.2% m-o-m and +2.5% y-o-y). Both headline and core eased by 10bps on a y-o-y basis in July vs. June. Food prices climbed 0.1% m-o-m (with a -0.1% drop in food at home offset by a 0.3% increase in food away from home) while energy prices eased 1.5%. Shelter rose 0.1% m-o-m, with Owners’ equivalent rent (OER) accelerating to +0.3% (up from +0.2% in June). To highlight, energy and gasoline prices fell for a second consecutive month, grocery prices (-0.1%) declined for the first time since March and supercore inflation rose by a modest +0.2% m-o-m. However, core goods prices (+0.2%) saw their largest monthly increase since last September as computer software and accessories prices rose +21.2% y-o-y, their largest increase on record. With memory chips increasingly being diverted towards data-center demand. The July PPI (Producer Price Index) came in cooler than anticipated on a headline basis (+4.7% vs. consensus at +4.9% and down from +5.5% in June) while the core numbers were a bit firmer: ex-food/energy came in +4.2% (down from +4.7% in June but above consensus at +4.1%) and ex-food/energy/trade came in at +4.7% (down from +5% in June but above consensus at +4.6%).

US data

The preliminary August University of Michigan consumer sentiment came in at 51.0 vs. consensus at 55.0. This translates into a 8% fall in August, ending two consecutive months of improvement. While views of personal finances saw only minor declines, expected business conditions sank 11% for the short run and 17% for the long run. Year-ahead inflation expectations ticked up from 4.2% in July to 4.3% this month. The current reading substantially exceeds the 3.4% seen in February before the Iran conflict began, along with all 2024 readings. Long-run inflation expectations held steady at 3.3% for the third consecutive month, remaining a bit higher than its 2024 range of 2.8% to 3.2%. In line with this data, retail sales fell 0.6% in July, marking the biggest decrease since May 2025, compared with a revised gain of 0.2% in June. Economists were projecting a small increase. The decline followed a notable bump in spending in both April and May as Americans dipped into their government tax refunds. On other data, the NFIB’s small business optimism index rose more than expected to an 11-month high of 99.8 in July (vs. 97.5 expected). Existing home sales came in at an annualized pace of 4.06m in July (vs. 4.05m expected), which was a 3-month low. Lastly, the New York Fed’s household debt report for Q2 showed the biggest quarterly decline in mortgage debt since 2013.

Central banks

The Reserve Bank of Australia left interest rates unchanged at 4.35%, as expected, and said inflation in the country remained too high. The bank has already hiked interest rates three times this year. The RBA board unanimously voted to leave rates on pause, saying in a statement “the economy appears to be slowing as expected”. The RBA governor, Michele Bullock, told reporters after the announcement that the board had considered raising rates, with each board member worried that inflation was still too high. In Norway, the Norges Bank kept its key policy (deposit) rate unchanged at 4.25%, as expected. This marked the second consecutive meeting where borrowing costs were held steady, with the central bank signaling that persistent price pressures could still necessitate further tightening.

Highlights

Oil update

Global oil consumption stabilized in July but remains deeply depressed, sitting 4.5mbd below pre-war levels, with weakness spreadring evenly across China, emerging Asia, and the broader emerging market complex. On the supply side, production has rebounded sharply since the May trough (up approximately 6.7mbd), narrowing the supply-demand deficit to around 0.5mbd in July from 2.8mbd in June. However, the deficit has averaged 3.5mbd since March, with the core disruption remaining the restriction of transit through the Strait. Despite this, the market has so far absorbed the shock better than feared: more than five months into the crisis have shown that a combination of rerouting by Saudi Arabia and the UAE, Strategic Petroleum Reserve (SPR) releases, additional supply from the US and Brazil, and evidence of smuggling and shuttle transfers through the Strait have all helped contain the impact on crude prices. The stress is most visible in refined products rather than crude itself—gasoline is approximately 50% above pre-war levels and diesel around 60%, compared to roughly 30% for crude, a divergence that continues to feed through into end-user inflation. However, this resilience is becoming harder to sustain: inventories have been drawn down continuously and are now approaching very low levels, leaving the market increasingly exposed to any further disruption. The base case remains that some form of agreement could be reached during the current quarter, but timing is highly uncertain and further price spikes cannot be ruled out before any resolution materializes.

On rates

Last week's bond markets saw a sharp steepening, with front-end yields falling as softer inflation data and weak activity prints, including a miss on retail sales and the disappointing University of Michigan consumer sentiment, pulled September Fed hike expectations lower. The long end moved in the opposite direction, with the 10-year rising 4.7bps to 4.69% and the 30-year at 5.26%, within 2bps of its post-2007 high, pressured by a combination of heavy Treasury supply, elevated fiscal deficits, and the capital demands of the AI investment boom. This was underscored by the week's Treasury auctions, where the 10-year cleared at its highest yield since 2007 and the 30-year at its highest since 2001, a reminder of how much the market's required compensation for duration risk has shifted. Fed speakers added nuance: Cleveland's Hammack maintained her hawkish stance, arguing the Fed "needs to act now," while Richmond's Barkin was more measured, characterizing much of current inflation as shock-driven and likely to pass. In Europe, the same dynamic played out but with greater force, as a renewed surge in energy prices and wheat sharply higher on Russian supply disruptions, reignited inflation fears and pushed the 1-year Euro inflation swap up 19.9bps. OAT yields hit their highest since 2009 and 30-year Bund yields reached a post-2011 high. In Japan, JGB yields climbed to a post-1996 high of 2.93% despite disappointing Q2 data, suggesting that the rise in yields is being driven less by growth optimism than by the market's growing conviction that the BoJ will tighten further, with a September hike now 79% priced.

Earnings

With over 90% of S&P 500 companies having reported, Q2 earnings season is coming to an end on a strong note. Around 74% of companies have beaten expectations by more than 2% (broadly in line with Q1 and well above historical norm) with the average surprise the highest in the available data, though headline figures are flattered by sizeable non-operating gains at Google and Amazon linked to private investments. Adjusted for these effects, results remain strong relative to history. The outperformance is broad-based, led by technology, energy, healthcare, and financials, and the season has driven full-year EPS estimates up roughly 6% at the index level, or around 2% excluding mega-caps. Notably, Q3 guidance has been even more constructive than Q2, with around 70% of companies that typically guide having done so. In Europe, the season has been less spectacular but still better than feared, with 56% of Stoxx 600 companies beating estimates against a historical average of 52% (the second-strongest beat rate since 2023) pointing to full-year earnings growth of around 18%. Japan has also delivered solid results, with 71% of companies beating earnings expectations by more than 2%. Among last week's results, Applied Materials posted modest upside, while Alcon and IHG both beat on EPS driven by healthy underlying demand. As the season winds down, attention shifts to the US consumer, with Home Depot (Tuesday), Target (Wednesday), and Walmart (Thursday) offering a interesting read on spending resilience. Elsewhere, Analog Devices and Deere report in the US, Alibaba and Baidu in China, and BHP and Geberit are the European highlights.

What to watch

• Monday: US Empire Manufacturing; Canada CPI; Japan Q2 GDP; Singapore July Exports; China July Data
• Tuesday: US ADP Employment; UK Weekly Earnings and Employment; Germany ZEW Survey
• Wednesday: FOMC Minutes; UK and Eurozone CPI; Indonesia Policy Rate
• Thursday: US Initial Jobless Claims; Sweden Riksbank Policy Rate; China Loan Prime Rate; Australia Employment; Taiwan July Exports
• Friday: US PMI; ECB 1Y and 3Y Inflation Expectations; UK and Eurozone Flash August PMIs; Japan CPI; South Korea August 20-day Exports