Morning Market Brief – 2026-08-25

Tuesday morning greets us with a market caught in the grip of rising bond yields, escalating trade tensions, and sky-high expectations for the tech sector. US government interventions aimed at cooling the debt market yielded only a very short-lived effect, while in Europe, investors are coming to terms with the prospect of an increasingly hawkish (i.e., prone to rate hikes) central bank. However, everyone is holding their breath ahead of two key events in the second half of the week: Nvidia’s earnings release and the Fed Chair’s address at Jackson Hole.

Geopolitical Environment

• End of the US–Canada trade truce. In recent days, we reported on intense negotiations between Washington and Ottawa that offered hope for de-escalation. Unfortunately, the talks ended in failure. The United States implemented 50% tariffs on a broad list of Canadian goods (covering approximately $20–30 billion in annual exports). In response, Canadian Prime Minister Mark Carney announced the introduction of "dollar-for-dollar" retaliatory tariffs starting September 8, targeting US steel, agricultural equipment, electronics, and home appliances, among other goods. (Sources: Reuters; ABC News; NPR; Canadian Press).
• The sanctions noose tightens around Iran. As previewed yesterday, US Treasury Secretary Scott Bessent announced a new wave of the "toughest ever" sanctions aimed at Iran. Crucially, these include secondary sanctions, which entail penalizing third-country entities operating in the energy, shipping, financial, or cryptocurrency sectors in connection with Tehran. Regional tensions are mounting—in mid-August, an incident was reported in the Strait of Hormuz area, where a commercial vessel was struck by a projectile, damaging the engine room and causing casualties. As a result, crude oil prices remain elevated: Brent above $90 per barrel, and US WTI in the high $80s. (Sources: Al Jazeera; Reuters; UKMTO).

Today's Highlights

• US Treasury Department intervention fails to calm the debt market. To salvage the situation in the bond market, the US government announced it would at least double the size of its debt repurchase operations (so-called buybacks for 10–30-year bonds) to $4 billion per operation. Unfortunately, the temporary dip in yields quickly evaporated, and 10-year Treasury yields once again approached the concerning level of 4.7%. The high cost of capital, combined with disappointing results from retail giant Walmart, is weighing heavily on Wall Street’s major stock indices. (Sources: Reuters; CNBC; Axios; Wall Street Journal).
• European Central Bank tightens its belt as German yields break records. On the Old Continent, money markets (OIS contracts) are almost fully pricing in an ECB deposit rate hike to 2.50% in September. Furthermore, the probability of Eurozone rates reaching 3.0% by the end of 2027 is growing. The impact is visible in the debt market—10-year German Bund yields are hovering around 3.25–3.30%, marking their highest levels in roughly 15 years. Investors fear a stagflation-like scenario (a combination of sluggish economic growth and high inflation), fueled by surging oil and gas prices. (Sources: Reuters; Trading Economics; Bundesbank Monthly Report).
• Wall Street holds its breath ahead of tomorrow's Nvidia report. On Wednesday after the US market close, Nvidia will publish its financial results for Q2 FY2027. Expectations are astronomical—analysts project revenue around $92 billion, which would represent a near-doubling of sales year-over-year. The options market is pricing in an implied post-earnings move of around 6% in either direction. At the company's current scale, this translates to a potential swing in market capitalization of a massive $300–350 billion in a single trading session. (Sources: Investing.com; TipRanks; MarketBeat).
• Alibaba taps markets for massive AI capital. The Chinese tech giant announced the largest secondary share offering in the history of companies listed in Hong Kong (HKEX). Alibaba plans to issue 710 million new shares to raise approximately $10.2 billion (HKD 80 billion). The offering price was set at an 8.4% discount to the last closing price, triggering an immediate sell-off and an 8–10% drop in the company's shares in Hong Kong. The raised funds will be entirely dedicated to AI technology development, including chip production, computing infrastructure, and proprietary large language models. (Sources: Reuters; Bloomberg; Alibaba statement).

Market Background

• UK inflation serves as a reminder of price pressures. In line with expectations, July headline CPI in the UK rose to 2.9% year-over-year (up from 2.6% in June). Far more important, however, is the core CPI figure (excluding energy and food prices), which remained steady at 2.6% YoY for the third consecutive month. This points to sticky, persistent inflationary pressures, rooted primarily in the services sector and domestic factors. (Sources: DailyForex; Trading Economics).
• China continues to hold back on credit stimulus. The People's Bank of China (PBoC) kept its benchmark LPR (Loan Prime Rate—the main reference lending rate) unchanged in August: at 3.00% for one-year loans and 3.50% for five-year loans. This marks the 15th consecutive month without a change. The decision aligned with market consensus and confirms that Beijing is not currently planning broad, direct monetary easing, opting instead for selective support of key industries. (Sources: Reuters; Investing.com).

What to Watch

The macroeconomic calendar picks up pace this week. The spotlight remains on sentiment data, inflation prints, and commentary from central banks.

• Aug 25 (10:00) – Germany: Ifo Business Climate Index for August. A key barometer of German business sentiment that will show how the Eurozone's largest economy is coping with rising energy costs.
• Aug 25 (16:00) – US: Conference Board Consumer Confidence Index for August. It will provide early signals regarding consumer demand across the Atlantic.
• Aug 26 (14:30) – US: A barrage of heavyweight data releases: Core PCE Price Index (Personal Consumption Expenditures—the Fed's preferred inflation gauge, absolutely critical ahead of Jackson Hole), the second estimate of Q2 GDP, and Durable Goods Orders.
• Aug 26 (After US market close): Nvidia financial results.
• Aug 27 – Aug 29 – US: Annual Economic Policy Symposium in Jackson Hole. The key highlight will be Friday's (Aug 28, 16:00) speech by the new Fed Chair, Kevin Warsh, which could set the medium-term direction for global monetary policy.
• Aug 28 (14:30) – Canada: Q2 GDP Growth Report. In the context of the freshly erupted trade war with the US, data on the health of the Canadian economy takes on particular significance.