GLOBAL MARKETS

Global Markets Weekly Outlook: 31 August–4 September 2026

Global markets enter the week facing a complex combination of monetary policy uncertainty, weakening labour-market signals, rising energy prices and heightened geopolitical risks. The key theme for the week is increasingly clear: the Federal Reserve’s next policy decision may depend less on inflation alone and more on the extent to which the US labour market is cooling.

Following Jackson Hole, market expectations regarding the Fed have become increasingly sensitive to incoming economic data. Markets are currently pricing in a higher probability of a 25-basis-point rate hike at the September meeting. As a result, this week’s employment data will be particularly important in determining the direction of Treasury yields, the US dollar, technology stocks, precious metals and broader global risk sentiment.

The three major themes from last week were the growth-inflation dilemma in the United States, continued attention on Nvidia and AI-related investment, and the energy risks created by US-Iran tensions and developments around the Strait of Hormuz. These themes are likely to shape the week ahead through a combination of Fed expectations, employment data and oil prices.

The main challenge for policymakers is that the US economy is showing signs of slowing while inflationary pressures have not fully disappeared. This means the debate is no longer simply about choosing between inflation and growth. Instead, markets are increasingly asking whether changes in the labour market will justify a less hawkish monetary policy stance.

US Markets: Employment Takes Centre Stage

The US nonfarm payrolls report will be the most important data release of the week and could become one of the key indicators ahead of the September Fed meeting.

July’s employment decline of around 23,000 was particularly notable, especially when combined with downward revisions to previous months. August expectations currently point to employment growth in the region of 45,000–58,000, which may appear positive at first glance but would still represent relatively weak job creation for the US economy. The unemployment rate is expected to remain around 4.1%.

However, the headline NFP figure should not be viewed in isolation. Markets will closely examine average hourly earnings, the unemployment rate, labour-force participation and revisions to previous employment figures.

A weak employment report could reduce expectations for further Fed tightening, potentially pushing Treasury yields lower and supporting technology stocks. However, the weakness would need to remain controlled. If employment deteriorates too sharply, concerns could shift from monetary policy toward recession risk, which would likely weigh on equities.

The ideal outcome for markets would therefore be a report that is weak enough to reduce Fed hawkishness but strong enough to avoid generating significant recession concerns.

A stronger-than-expected NFP report, particularly if accompanied by strong wage growth, could reinforce rate-hike expectations. In that scenario, Treasury yields and the US dollar could rise further, while gold and high-valuation technology stocks may come under additional pressure.

ADP, JOLTS and ISM: Key Signals Ahead of NFP

Before Friday’s employment report, markets will closely monitor ADP employment data, JOLTS job openings and ISM surveys.

A meaningful decline in job openings would suggest that labour demand is genuinely weakening. If ADP also comes in below expectations, investors may increasingly conclude that July’s weak employment performance was not temporary and that labour-market weakness continued into August.

Such a scenario could be supportive for US bonds and negative for the dollar, assuming recession concerns remain contained.

The ISM surveys will also be important, particularly their price components. Strong activity combined with rising prices could revive inflation concerns, pushing Treasury yields and the dollar higher while increasing pressure on the Nasdaq.

Conversely, weaker activity combined with easing price pressures would represent a more dovish outcome for Fed expectations.

Federal Reserve: Why “Bad Data” Could Initially Support Markets

One of the most important dynamics following Jackson Hole is that weaker economic data could initially be viewed positively by financial markets.

The transmission mechanism is straightforward:

Weaker employment → less hawkish Fed expectations → lower rate expectations → lower Treasury yields → support for technology stocks.

However, this relationship only works if the economic slowdown appears manageable. If the data becomes excessively weak, the narrative could change:

Weak economy → recession concerns → falling equities.

This creates a delicate balance for global markets. Investors are effectively looking for evidence of economic moderation without a significant deterioration in growth.

The combination of a weak or moderate NFP figure, controlled wage growth and stable unemployment could therefore be positive for bonds, gold and technology stocks. On the other hand, strong employment, high wages and persistent inflation pressures would likely strengthen expectations of further Fed tightening.

Technology and US Equities

Technology shares remain particularly sensitive to changes in Treasury yields and Fed expectations.

Nvidia’s strong earnings continue to support confidence in AI-related investment and the broader technology sector. The key question is no longer limited to Nvidia’s individual performance but whether investment across the wider AI ecosystem remains strong, including spending by major technology companies on data centres and artificial intelligence infrastructure.

If Treasury yields decline while AI investment remains resilient, technology stocks could benefit from a powerful combination of lower discount rates and strong earnings expectations.

However, if Treasury yields continue rising and the Fed becomes more hawkish, high-valuation technology stocks may face increased profit-taking pressure.

Nasdaq futures were already under pressure following renewed rate concerns and weakness in semiconductor stocks. The technology sector therefore remains one of the most sensitive areas of the market as investors assess the interaction between monetary policy and AI-related growth expectations.

Asian Markets: Technology and Rate Pressures

Asian markets have started the week under pressure, with Japan, South Korea and broader regional equity markets affected by weakness in technology and semiconductor shares.

The Nikkei has been particularly sensitive to higher interest-rate expectations in both Japan and the United States, rising Japanese government bond yields and changing currency conditions.

South Korean equities remain especially vulnerable because of the heavy weighting of technology and semiconductor companies within the market. The combination of rising US yields, Nasdaq weakness and pressure on AI and chip stocks can therefore have a disproportionately negative impact on the KOSPI.

Meanwhile, China’s manufacturing PMI remains below the key 50-point threshold, suggesting that economic activity has not yet regained strong momentum. Weak Chinese industrial activity could also affect global demand expectations for industrial commodities, particularly copper and other metals linked to manufacturing.

Overall, the short-term environment for Asian equities remains challenging, with interest rates, technology-sector performance and global risk appetite likely to remain the main drivers.

Europe: Inflation Returns as a Risk

Europe faces a similar but not identical challenge to the United States.

Inflation remains elevated, while economic activity has recently shown signs of improvement. This combination of persistent inflation and recovering growth could limit the European Central Bank’s room to ease monetary policy.

Energy prices represent an additional risk. Higher oil prices could push headline inflation higher and reduce expectations for future ECB rate cuts.

Germany’s August inflation data will therefore be closely watched. A higher-than-expected reading could push European bond yields higher and weigh on the DAX, while a softer inflation figure could provide the ECB with greater policy flexibility and support European equities.

At the same time, Germany is not facing an entirely negative economic picture. Improving export expectations, public investment, defence spending and continued investment in AI and digitalisation could provide medium-term support to economic activity.

The key risk for Europe remains the combination of high energy costs and renewed inflation pressure, particularly if Brent crude remains above $90 per barrel.

DAX: Record Highs but Inflation Remains a Key Risk

The DAX recently reached record levels, supported in particular by gains in the automotive sector. BMW, Volkswagen and Mercedes-Benz were among the stronger performers, while the index posted solid gains over the month.

However, inflation and energy costs remain important risks for European equities.

If German inflation surprises to the upside, markets may reduce expectations for easier ECB policy. This could lead to higher European yields and pressure on equity valuations.

If inflation moderates more than expected, the outlook for European risk assets could improve.

The DAX therefore enters the week balancing strong recent momentum against the risks created by inflation, oil prices and changing interest-rate expectations.

Gold, Silver and the US Dollar

Gold faces two powerful but opposing forces.

On the positive side, geopolitical tensions in the Middle East, safe-haven demand and uncertainty surrounding the Strait of Hormuz provide support.

On the negative side, a stronger US dollar, higher Treasury yields, hawkish Fed expectations and rising expectations of further rate hikes create significant pressure.

Gold recently experienced a sharp decline following renewed hawkish signals but remains highly sensitive to both US yields and geopolitical developments.

If Treasury yields remain elevated or continue rising, gold could remain under pressure. However, if yields begin to decline, the combination of lower rate pressure and ongoing geopolitical uncertainty could provide renewed upside support.

Silver currently has a relatively stronger fundamental position because it benefits from both precious-metal demand and industrial demand. Continued resilience in industrial activity could support silver, although a sharp strengthening of the dollar could still limit gains.

Oil: The Week’s Key Inflation Catalyst

Oil may be one of the most important assets to watch this week because its impact extends beyond the energy market.

The relationship is clear:

Higher oil prices → higher energy costs → higher inflation expectations → more hawkish central banks → higher bond yields.

For this reason, developments around the Strait of Hormuz have become relevant not only for oil markets but also for global interest-rate expectations.

Brent crude moved above $90 following renewed US-Iran tensions and military developments near the Strait of Hormuz. The region remains particularly important because of its role in global energy exports.

The short-term outlook for oil remains positive but highly volatile.

If tensions ease and shipping conditions normalise, the geopolitical risk premium could decline, potentially pushing Brent lower and reducing inflation concerns.

However, if tensions escalate or transportation disruptions continue, supply concerns could intensify, supporting oil prices and increasing global inflation risks.

Oil is therefore likely to remain one of the week’s most important transmission channels between geopolitics, inflation and monetary policy.

Natural Gas

Natural gas does not currently carry the same level of geopolitical risk premium as oil.

High inventories relative to historical averages suggest that immediate supply conditions remain relatively comfortable. This creates a more neutral-to-negative short-term outlook compared with crude oil.

A significant change in weather expectations or a tightening in inventories could alter this outlook, but for now, the market remains less exposed to geopolitical supply risk than Brent or WTI.

Industrial Metals

Copper remains relatively resilient despite pressure from a stronger dollar.

Under normal circumstances, a stronger dollar can weigh on copper prices. Continued resilience therefore suggests that industrial demand and supply conditions are providing support.

China remains the most important variable. Stronger Chinese growth and manufacturing activity would be supportive for copper, while further deterioration in industrial activity could increase downside risks.

The short-term outlook remains cautiously positive to neutral.

Platinum and palladium also continue to receive support from supply and industrial-demand considerations, although they remain vulnerable to a sharp strengthening in the US dollar.

Aluminium remains broadly neutral, with Chinese industrial production, global manufacturing activity, energy costs and the dollar likely to remain the main drivers.

Agricultural Commodities

Agricultural commodities are being driven primarily by supply conditions and weather rather than the same macroeconomic factors influencing precious and industrial metals.

Soybeans remain supported by concerns about US crop quality and continued Chinese demand.

Wheat continues to receive support from geopolitical risks affecting Black Sea shipping. However, because prices are highly sensitive to developments in the region, sudden reversals remain possible if shipping conditions improve.

Coffee remains under pressure because of expectations of stronger supply from Brazil.

Cotton has experienced volatility as weather-related production risks compete with profit-taking following previous gains.

Sugar remains supported by expectations of supply shortages.

Cocoa continues to carry a supply-risk premium because of adverse weather conditions in major West African producing countries, although volatility remains high.

Corn is supported by production concerns, with weather conditions and US crop expectations remaining the key factors.

Key Market Scenarios for the Week

More Market-Friendly Scenario

If US employment data is weak to moderate, wage growth remains controlled and inflation indicators do not accelerate significantly:

• Fed hawkish expectations could ease
• Treasury yields could decline
• The US dollar could weaken
• Gold could receive support
• Nasdaq and technology stocks could outperform
• Emerging markets could benefit from improved global risk appetite

More Hawkish and Risk-Negative Scenario

If NFP is strong, wage growth remains elevated and ISM price components show continued inflation pressure:

• September rate-hike expectations could increase
• Treasury yields could rise further
• The US dollar could strengthen
• Gold could remain under pressure
• Nasdaq correction risks could increase
• Broader global risk appetite could deteriorate

At the same time, any escalation in US-Iran tensions or disruption around the Strait of Hormuz could intensify inflation concerns by pushing oil prices even higher.

Global Markets: Main Levels and Themes to Watch

🛢️ Brent crude: Around the $90 level
📈 US 10-year Treasury yield: The 4.70%–4.75% area
🏦 US 2-year Treasury yield: Above 4.30%
💱 USD/JPY: Around 160
📊 September Fed rate-hike expectations: Around the 60% area
👷 US NFP, wages and unemployment: The week’s main macroeconomic catalyst
🌍 US-Iran and Strait of Hormuz developments: A continuing geopolitical risk
🇩🇪 German inflation: Key for European rates and the DAX

If several of these indicators move in the same direction, global market trends could become significantly clearer.

Overall Outlook

The coming week is not simply a “Fed week”; it is more accurately an employment week that could shape the Fed’s next move.

The central equation for global markets is:

Employment → Fed expectations → Treasury yields → US dollar → Global risk appetite

At the same time, oil remains the key wildcard. Rising energy prices could keep inflation elevated and complicate the outlook for both the Fed and the ECB, even if economic growth and employment begin to slow.

The most constructive scenario for risk assets would be a controlled slowdown in the US labour market, easing wage pressures and stable inflation expectations. This could allow Treasury yields to decline without creating serious recession concerns.

The more challenging scenario would be strong employment data combined with elevated wages and persistent price pressures. Such a combination could reinforce expectations of further monetary tightening, strengthen the dollar and increase pressure on gold and high-valuation technology stocks.

Ultimately, Friday’s NFP headline will be important, but the broader picture will matter more. Markets will assess the combined message from employment growth, wage data, unemployment and revisions to previous months.

With geopolitical risks still elevated and Brent crude above $90, global markets enter the week facing an unusually interconnected set of risks. Labour-market data will shape Fed expectations, oil will influence inflation, and both factors will determine the direction of Treasury yields and global risk appetite.