US employment data surprised to the upside in August, with nonfarm payrolls rising by 162,000, well ahead of expectations, while upward revisions to June and July added a further 55,000 jobs. The unemployment rate held steady at 4.1%, while the labour force participation rate increased to 61.6%. Other labour market indicators during the week were somewhat mixed, with job openings edging higher to 7.27 million but falling short of expectations, while initial jobless claims were little changed. ADP data showed that private employers added just 38,000 jobs in August, the lowest monthly increase since January.
US business activity continued to point to economic expansion in August. Despite easing from 55.6 in July to 54.6, the ISM manufacturing PMI remained in expansion territory for an eighth consecutive month, with new orders, production and employment all continuing to expand. Meanwhile, services activity strengthened, with the ISM services PMI rising 1.3 percentage points to 55.4 as new orders and backlogs improved, although the prices paid component climbed to its highest level in four years.
The conflict between Washington and Tehran escalated sharply this week, with the US launching a pre-emptive strike against an Iranian island in the Strait of Hormuz to prevent Iran from laying new sea mines. Brent crude rose 8.64% over the week to $95.78/bbl as concerns over potential supply disruptions resurfaced, adding to inflation concerns.
Global government bond yields also rose sharply, reaching levels not seen in years. The US 10-year Treasury yield reached an intraday high of 4.85%, its highest since January 2025, while yields in the UK and Japan also rose to multi-year highs. A Bloomberg gauge of global sovereign bonds climbed to 3.78%, its highest level since mid-2008. Yields subsequently retraced from their intraday highs, with the US 10-year Treasury closing the week at 4.79%, up 7 bps.
Major US equity indices finished the week narrowly mixed as investors weighed renewed US-Iran hostilities, higher oil prices, stronger employment data and shifting expectations for Federal Reserve policy. The Dow Jones Industrial Average fell 0.27%, while the S&P 500 gained 0.09% and the Nasdaq Composite rose 0.40%.
Eurozone retail sales fell 0.6% month on month in July, the sharpest decline since May 2025, with Germany, Spain and Italy all recording lower sales volumes, while France and the Netherlands saw growth. Producer price inflation, however, surprised to the upside, with prices rising 1.6% from June, driven by a sharp increase in energy-related costs. Capital goods prices rose by just 0.3%, while prices for nondurable consumer goods declined.
European equities came under pressure early in the week as renewed US-Iran hostilities pushed energy prices and government bond yields higher. Sentiment later stabilised as energy prices eased from their highs and rate concerns moderated. The STOXX Europe 50 fell 1.43% for the week, while the FTSE 100 was broadly flat.
China’s economic data remained mixed in August, with the official manufacturing PMI improving to 49.8 from 49.2, although it stayed below the 50 threshold for a second consecutive month. Production, new orders and export orders improved, but the official non-manufacturing PMI remained at 49.0, its lowest level since December 2022. The private sector painted a more positive picture, with the RatingDog manufacturing PMI rising to 51.5 from 50.9, supported by stronger output and new orders, while the services PMI increased to 51.4 on stronger domestic demand.
Asian markets were mixed over the week. Japan’s Nikkei 225 fell 2.02%, pressured by rising JGB yields and growing expectations of near-term BoJ tightening, while a stronger yen later in the week added further pressure on exporters.
Mainland Chinese equities diverged from Hong Kong, with fading momentum in AI-related shares weighing on the Shanghai Composite, which fell 0.56%, while the Hang Seng rose 0.32% in local currency terms as it recovered towards the end of the week.
Market Moves of the Week:
South Africa’s manufacturing sector weakened further in August, with the Absa Manufacturing PMI falling to 45.8 from 46.8, marking its fourth consecutive monthly decline and its lowest reading of 2026. The deterioration was driven by a sharp drop in business activity and new orders, with Absa pointing to subdued domestic demand, weak consumer confidence, and softer spending on non-essential goods. Export sales, however, showed some improvement.
The broader private sector offered a slightly more positive signal, with the S&P Global PMI edging up to 50.5 from 50.3, supported by a modest increase in new orders and a second consecutive month of output growth. Purchasing activity also strengthened, although export sales remained only marginally positive, suggesting that the path to a stronger recovery remains uncertain.
South African equities came under pressure this week, with the JSE All Share falling 1.22%, led by a 2.30% decline in the Resources 10 and a 1.44% fall in the Industrial 25. Listed property and Financials were relatively resilient, slipping 0.14% and gaining 0.23%, respectively. The rand, however, strengthened against the US dollar, closing Friday at R15.95/$.
Chart of the Week:
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