Overview
Global equities ended last week on a softer note, with the Nasdaq underperforming its peers despite August delivering positive returns overall. Investors are now eyeing key economic indicators and Federal Reserve signals as the next catalysts, with AI momentum and potential policy easing continuing to influence sentiment.
US markets: A mixed close to August
US equity markets posted mixed performance at the end of August, with technology names dragging broader indices lower. The section below explores recent market movements and investor sentiment drivers.
Technology drag weighs on indices
Equities slipped on Friday, led by weakness in the tech-heavy Nasdaq Composite, which lagged behind the S&P 500 and Dow Jones Industrial Average. Despite the late-month dip, the S&P 500 rose 1.9% in August, extending its winning streak to four months and holding a year-to-date gain of nearly 10%. The Nasdaq remains up over 11% for the year, though elevated expectations around AI and tech earnings appear to have capped recent gains.
Bond market remains steady
Bond yields remained stable, with the 10-year US Treasury yield holding near 4.2%. While inflation pressures are gradually easing, markets anticipate continued volatility into year-end. However, such pullbacks could present entry opportunities for investors to reallocate toward diversified, quality assets at more favourable valuations.
Inflation trends and Fed outlook
Investors continue to focus on inflation dynamics and the Federal Reserve’s evolving stance on interest rates.
July inflation aligns with forecasts
The latest Personal Consumption Expenditures (PCE) data showed headline inflation steady at 2.6% year-on-year, while core inflation edged up to 2.9%. Goods prices could face temporary upward pressure from tariffs, whereas services inflation is expected to soften in the coming months.
Fed policy in focus
Federal Reserve Chair Jerome Powell’s speech at Jackson Hole hinted at a potential policy pivot. With labour market data showing early signs of cooling, markets are pricing in an 89% probability of a 25 basis point rate cut in September. Further rate moves remain data-dependent, particularly on employment and inflation figures due in the weeks ahead.
Broader market drivers
Beyond central bank policy, several structural and thematic forces are shaping market sentiment and positioning.
AI and infrastructure continue to lead
Investor enthusiasm around artificial intelligence remains a dominant theme, with spending on infrastructure and software helping sustain growth in the tech sector. While recent results from major firms like NVIDIA were solid, market reactions have been modest due to already lofty expectations.
Rotation beyond tech?
There is growing optimism that accommodative monetary policy could broaden the market rally beyond tech. Small and mid-cap stocks, along with cyclical sectors, may benefit from this shift, although seasonal volatility remains a near-term risk.
Asian markets: Divergence amid profit-taking and AI hype
Asian equity markets showed mixed performance as tech-related profit-taking in Japan and South Korea contrasted with optimism in China.
Asian equities started the week mixed, with Japan’s Nikkei falling 2% and South Korea down 0.7% as investors booked profits in tech shares. Meanwhile, China showed resilience, with blue chips rising 0.2% and Alibaba surging nearly 19% on optimism surrounding its AI and cloud businesses.
The MSCI Asia-Pacific ex-Japan index dipped by 0.1%, reflecting the muted sentiment during a quiet US trading day due to the Labour Day holiday.
European equities: Pressured by yields and inflation concerns
European markets closed lower last week, weighed down by rising bond yields and uncertainty around economic growth.
The STOXX 50 dropped 0.8% and the STOXX 600 lost 0.6%, with banks such as Santander, ING, and Nordea down over 1% amid rising bond yields. Notably, SAP declined 1.8%, while Rheinmetall gained 3%, bolstering defence sector stocks.
Currency and commodity highlights
Currencies and commodities were influenced by macroeconomic data, energy supply dynamics, and holiday-thinned trading volumes.
Dollar and euro
The US Dollar Index hovered near one-month lows at 97.8, with trading activity subdued. The EUR/USD edged higher to 1.1712, as markets await this week’s labour data for further clarity on Fed direction.
Oil prices
Crude oil prices continued to weaken, with Brent trading at $67.21 and WTI at $63.78, both down 0.4%. The losses follow a 7% decline in August, as concerns over weak Chinese manufacturing data and rising OPEC+ output outweighed fears of sanctions on Russian exports.
Manufacturing activity: Mixed results in Asia
Manufacturing data across major Asian economies signalled uneven momentum heading into September.
- Japan’s manufacturing PMI fell to 49.7
- South Korea’s PMI slipped to 48.3, marking a seventh straight month of contraction
- China’s Caixin PMI rose to 50.5, indicating modest growth, though analysts warn the rebound remains fragile
Equities in focus
A range of corporate updates and analyst commentary influenced share prices across sectors and geographies last week.
Samsung electronics
Shares fell 2.3% after the US revoked authorisations allowing access to semiconductor equipment for its Chinese plants. The rule takes effect in 120 days. While over a third of Samsung’s DRAM output is in China, short-term impact is expected to be limited.
Meta platforms
Meta is exploring AI partnerships with Google and OpenAI, while developing its in-house Llama 5 model. The strategy supports both user-facing features and internal development tools.
Alibaba
US-listed shares surged 13% on Friday, driven by 26% cloud business growth linked to AI, despite total revenue slightly missing forecasts at 247.65 billion yuan.
BYD
Quarterly profit dropped nearly 30% to 6.4 billion yuan, hit by price wars and slowing domestic vehicle sales. Revenue rose 14% to 200.9 billion yuan, but production slowed and capacity expansions were delayed.
Marvell technology
Shares plunged 19% due to a weak outlook for custom AI chip sales to cloud providers like Amazon and Microsoft. CEO Matt Murphy cited “lumpiness” in demand. Analysts expect Q4 to be stronger due to delayed demand and potential competitor setbacks.
Dell technologies
Shares fell 9% as AI server costs impacted margins. Despite this, Dell raised its annual revenue forecast to $105–109 billion. Q2 gross margin fell to 18.7%, though the company prioritised fulfilling demand over profitability.
Super Micro Computer
Shares dropped over 5% due to lingering concerns around financial controls and audit processes. The company reiterated weaknesses that could affect timely and accurate reporting.
Rolls-Royce
The company denied IPO rumours for its Small Modular Reactor (SMR) unit, which is backed by £2.5 billion in UK government funding. The unit aims to build Britain’s first SMRs, with global demand rising.
Kraft Heinz
Reportedly near a corporate split, potentially unlocking value. The grocery spinoff could be valued at $20 billion, while shares rose 2.7%.
Caterpillar
Raised its 2025 tariff impact estimate to a range of $1.5 to $1.8 billion, affecting Q3 and full-year results. Despite this, Caterpillar maintained its sales and revenue outlook, though margins are expected near the lower end of guidance.
Novo Nordisk
Cancelled new hires and cut bonuses amid a global hiring freeze and two reductions in its growth forecast, partly due to rising competition from Eli Lilly.
Morgan Stanley updates
Morgan Stanley raised price targets on US retail stocks, including Ulta Beauty, Dick’s Sporting Goods, Ollie’s Bargain Outlet, and Dollar General, after better-than-expected Q2 results. Ulta and Dick’s were highlighted for strong sales and market share gains.
The firm also spotlighted GE Vernova and Siemens Energy as top renewable energy picks. GE Vernova is projected to reach $50 billion in revenue and an 18% EBITDA margin by 2028. Siemens Energy may achieve 13–15% EBITA margin growth, supported by its Gas and Grid businesses.
Key events to watch this week
A data-heavy week lies ahead, shortened by the US Labour Day holiday, with key updates from labour markets, trade, and corporate earnings.
- Nonfarm payrolls
- Unemployment rate
- Wage growth
- ADP employment report
- JOLTS and job cuts
- ISM PMIs
- US trade data
- Earnings from Broadcom and Salesforce
- European inflation and retail sales
- Updated Chinese PMI readings
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