Morning Market Brief – 2026-08-02

Good morning. Sunday morning is a time when stock markets rest, giving us a perfect opportunity to summarize the extremely turbulent events from the turn of July and August. The past week brought a long-awaited de-escalation in the Middle East, which immediately cooled the overheated oil market. At the same time, investors are digesting a hawkish statement from the US Federal Reserve (Fed), which featured rare dissenting votes, alongside massive investment plans from tech giants that are inspiring as much excitement on Wall Street as concern over short-term profitability.

Geopolitical Environment

• Fragile truce and relief in the oil market. Late last week, the US paused airstrikes against targets in Iran, and Tehran declared a halt to its own attacks. Markets, which had previously been living in fear over flows through the Strait of Hormuz (accounting for about 20% of global oil consumption and the transport of massive volumes of liquefied natural gas, LNG), reacted instantly. Brent crude prices, which had temporarily spiked near $94–96 in July, fell by 8–9% after the pause in airstrikes was announced, briefly dropping below $90. The removal of the war risk premium allowed for a moderate rebound in futures on major Wall Street indices. (Sources: Reuters; Bloomberg; EIA; The New Arab).
• A new front in the trade war in the pharmaceutical market. US President Donald Trump announced a plan for drastic tariffs on imported generic drugs (substitutes for original medications). According to announcements, a 0% rate will apply for two years starting August 1, 2026, but will rise to 100% from August 2028, and to 200% a year later for companies that do not relocate production to the US. This decision, which bypasses innovative and patented drugs, directly hits India, which accounts for nearly half of the generic market volume in the US. (Sources: Qatar Tribune; IBTimes; GroundNews; ForumIAS).

Top Headlines Today

• Hawkish Fed and a crack in consensus. At its July meeting, the Federal Reserve maintained its target range for the federal funds rate at 3.50–3.75% (as a reminder: the previous June meeting also resulted in a decision to hold rates unchanged). The surprise, however, was the 9–3 vote split. Three regional Fed presidents—Beth M. Hammack, Neel Kashkari, and Lorie K. Logan—voted against the pause, advocating for a 25 basis point hike. The market views this as a clear signal that the fight against inflation is not over, with some analysts pointing to the risk of further rate hikes in the second half of the year. (Sources: USAToday; Signalscv; KuCoin; Currency Thoughts).
• The bill for the AI revolution weighs on tech giants. Quarterly results from Big Tech companies revealed a massive scale of spending on Artificial Intelligence (AI) infrastructure. Data compiled after Q1 shows that Alphabet, Amazon, Microsoft, and Meta plan to spend a combined total of around $725 billion in capital expenditures (CapEx) in 2026. Meta narrowed its full-year guidance to $130–145 billion, triggering pressure on its stock price due to concerns over when these investments will begin to pay off. On the other hand, the cloud continues to generate massive cash: Amazon reported record revenues ($200.6 billion, with the AWS segment growing 37%), and Azure profits at Microsoft are growing at a high double-digit pace. (Sources: Reuters; TradingKey; Global Banking & Finance; AI2027 Tracker).
• Japanese bonds under pressure as BOJ plays for time. Following its June rate hike to 1.0%, the market expects the Bank of Japan to leave interest rates unchanged. However, the situation in the Japanese debt market remains tense: the yield on 10-year Japanese Government Bonds (JGBs) rose to around 2.9%, reaching its highest levels in 30 years. Analysts attribute this to inflation concerns (driven by energy prices), the country's fiscal health, and foreign capital outflows. After a temporary strengthening (driven by probable government intervention estimated at tens of billions of dollars), the Japanese yen returned to weak levels around 159–160 per dollar. (Sources: TradingEconomics; Reuters; Investing.com; IMF Global Markets Monitor).
• Slowing momentum in the Chinese economy. Official data confirms a slowdown in the world's second-largest economy. In July, the manufacturing Purchasing Managers' Index (PMI) for China fell to 49.2 points from 50.3 points in June, contracting (a reading below 50 indicates a decline in activity) for the first time since February. The services sector also saw a decline to 49.0 points. In response, the People's Bank of China (PBoC) launched massive liquidity operations, injecting hundreds of billions of yuan into the banking system (including through a new overnight reverse repo instrument at a 1.25% interest rate) to ease end-of-month tensions. (Sources: NBS China; Straits Times; FX.co; Economic Times).

Market Background

• Resilient US investments. US durable goods orders rose 0.3% month-on-month in June (to around $334.8 billion), rebounding after a drop in May. A particularly positive signal is the 0.9% increase in non-defense capital goods orders excluding aircraft—a key indicator showing that US companies, despite high interest rates, remain eager to invest in expansion. (Sources: TradingEconomics; InvestingLive; KPMG).
• A golden era for global banks. Q2 2026 reports show excellent performance across the banking sector. Return on equity (ROE) ratios at the largest institutions in the US and Western Europe exceed 13%. Importantly, this record profitability is now driven not only by high interest rates (and resulting net interest margins) but also by strong growth in non-interest income, such as investment banking fees and commissions. (Sources: BankingHub; Deutsche Bank; Bank of America).
• TARGET2 system running smoothly again. The European Central Bank reported that the key TARGET2 settlement system in the eurozone has returned to normal operations after a brief technical outage caused payment processing delays. As a reminder, the ECB left key interest rates unchanged in late July (with the deposit facility rate at 2.25%). (Sources: Economic Times; BRG Building Solutions).

What to Watch

We are entering a new trading week that will be dominated by the US labor market and a series of economic activity readings globally.

• 08/03 (Monday) – China: Caixin Manufacturing PMI. The private sector counterpart to official data, which commodity markets (including copper and oil) will watch closely following the disappointing government reading.
• 08/03 (Monday) – US: ISM Manufacturing Index (16:00). The main barometer of sentiment among US manufacturers; prices paid for components will provide further clues on inflation.
• 08/04 (Tuesday) – Australia: RBA Interest Rate Decision (06:30). A key event for the Australian Dollar (AUD).
• 08/04 (Tuesday) – US: JOLTS Report (16:00). Data on job openings—a key first indicator ahead of Friday's nonfarm payrolls (NFP) labor market report.
• 08/05 (Wednesday) – US: ADP Employment Report (14:15) and ISM Services Index (16:00). The services sector accounts for the lion's share of the US economy, so this data will directly translate into dollar valuations and Fed expectations.