European Market Wrap - 18th August 2026

• European bourses were broadly in the red, pressured by elevated yields and geopolitical uncertainty.
• G10s are mixed against the USD, AUD outperformed whilst the Kiwi lagged a touch.
• US President Trump posted that "there are no talks or conversations going on, or scheduled, with the Islamic Republic of Iran. The Naval Blockade remains in full force and effect. The Hormuz Strait is open and operating".

EQUITIES

• European bourses look set to end Tuesday's session mixed, with the FTSE 100 helped by oil majors while the cyclical-heavy DAX 40 underperformed given its high composition of tech and industrials. The main driver has been the elevated long-end yields, which may pose a risk to equity valuations. On the geopolitical front, US President Trump recently posted that there are no talks or scheduled with Iran and that the naval blockade remains in full force and effect.
• Sectors lacked a clear bias. Energy topped the sector pile, followed by Retail and Utilities. To the downside is Tech, with Industrials and Construction rounding out the sector laggards.
• Key European stories included: Coloplast (+2.2%), Q3 revenue beat estimates; Whitbread (+1.5%), upgraded to market perform at SocGen; Hermes (-0.1%), downgraded to sector perform at RBC
• Elsewhere, a couple of Asian earnings after the close. Xiaomi reported profit that fell less than expected (CNY 9.46bln, exp. 5.76bln, prev. 11.90bln Y/Y), as it has been one of the biggest casualties of the ongoing memory chip crunch. For Baidu, Q2 revenue missed estimates (CNY 13.3bln vs exp. 31.6bln), marking a 5th consecutive quarter of revenue declines.
• US cash equities opened lower across the board, with clear underperformance in the NQ giving the effects of higher bond yields on tech. Despite the day's equity weakness, BofA's FMS showed that investor sentiment is the 3rd most bullish since 2022, with global equity allocation its highest since Nov'21. In terms of rotation, Tech, Banks and Energy has seen the most inflows while Industrials and Healthcare saw the most outflows.

FX

• DXY just above unchanged throughout the European day, lacking direction with headline catalysts light. The latest Middle East reporting was optimistic from Pakistan but not reflected by Iran and the US, and with Hormuz traffic low oil it looks like Crude could stay elevated and continue to weigh on the risk tone. Absent tier-1 data and headlines, should keep focus on yield moves with US supply tomorrow potentially the most expensive for the Treasury in 25 years. As for the move in yields, focus has been increasingly on tech heavyweights increasing capex; names include Google issuance this, and last week. Mizuho writes, “The question is becoming less about whether the curve steepens and more about whether we are approaching levels where real money starts to lean against the move in size and momentum eases”. Capping the move in US assets is the recent easing in Fed tightening expectations, markets assign a 35% probability of tightening in September - down from 50% this time last week.
• UK Jobs: The strong wage figures were caveated by a 6.1% rise in public sector pay helped by NHS pay awards, while the unemployment rate unexpectedly remained at the prior 4.9% level (exp. 4.8%) and the 3M employment change printed below the prior; sparking a modest dovish reaction with Cable falling 15 pips; action which persisted throughout most of the session, though was pared alongside USD weakness at the NY open. Now, Wednesday’s CPI is in focus, and with GBP having had a strong run vs. the USD, it could see a decent move should figures rise at a slower-than-expected pace. GBP/USD set to finish the domestic session off lows, around 1.3540. 1.35 should prove support with major DMAs 100+ pips below, while Monday's 1.3571 high could provide resistance.
• Action elsewhere was quiet. NZD dipped below 0.59 to a 0.5872 trough amid the risk tone, USD/JPY neared 160.00 as oil prices hit its terms of trade, action which initially failed to help energy exporters, but NOK and CAD saw some gradual strength throughout the session, CAD firmer, while NOK was stronger vs. the Buck (USD/NOK -0.1%), also firmer vs. SEK (NOK/SEK +0.2%) after it strengthened on Monday.

FIXED

• Global fixed benchmarks remained in the red this morning, and yields have remained near multi-decade highs. As a reminder, the yield story has been dictated by mild pressure in the front-end (recent dovish Fed repricing), and rising long-end yields (geopolitical/political/fiscal uncertainty).
• USTs (U/C) started the European session with losses of only a handful of ticks and remained within a fairly narrow 108-10 to 108-15+ range. The benchmark was ultimately little moved by US Export/Import Prices data and Industrial Production (M/M missed expectations). Elsewhere, yields are firmer across the curve. The US 30yr (5.32%) holds at levels not seen since 2007, whilst the US 10yr (4.74%) heads back to early 2025 levels. A further rise in yields could see a test of the 5% mark, though will likely need a clear catalyst for a firm breach above that level.
• Bunds (-46 ticks) and Gilts (-31 ticks) followed the bearish tone. UK paper was ultimately little moved to a mixed jobs report. In brief, the data doesn't show a significant change in the labour market, a point that was expected heading into the release. Initial focus on the hotter-than-expected wage metrics, including the upward revision to the measure with bonuses. Additionally, the claimant count unexpectedly declined, and the prior was revised down. However, this is offset by the unemployment rate unexpectedly remaining at the prior 4.9% level (exp. 4.8%) and the 3M employment change printing below the prior.
• ByteDance draws over USD 30bln in orders for jumbo bank loan.
• The UK sold GBP 4bln 4.875% 2036 Gilt: b/c 3.65x (prev. 3.13x), average yield 5.155% (prev. 5.040%), tail 0.1bps (prev. 0.1bps).
• SoftBank (9984 JT) is reportedly planning to issue JPY 1tln of retail corporate bonds, Nikkei reported.
• Continental (CON GY) to sell EUR-denominated 4yr noted; guidance seen MS +90bps.
• Germany opens book to sell EUR-denominated August 2056 Bund via syndicate, guidance seen +0.4bps over 2054 Bund.

COMMODITIES

• WTI and Brent Oct futures remained firmer but off best levels, as constructive geopolitical headlines were outweighed by escalatory rhetoric. Trump reiterated that the US remained in control of the Strait of Hormuz and said Iran wanted a deal, but doubted Tehran would accept the necessary terms, while stressing he was not seeking an extension of the Iran MoU and criticising Oman. Meanwhile, UKMTO also reported an outbound vessel was struck by an unknown projectile in the Strait, while the Houthis claimed a drone attack on an Aramco refinery in Saudi Arabia's Jazan region, although it remained unclear whether this referred to a fresh attack. Further upside was seen later in the session as US President Trump posted that there are no talks or conversations going on, or scheduled, with Iran and that the naval blockade remains in full force and effect. Despite this, the upside move was short-lived. Conversely, Pakistani journalist Malick overnight reported that an understanding to extend the US-Iran ceasefire had been agreed in principle. WTI extended to a USD 85.07/bbl high from a USD 83.77/bbl low, while Brent rose to USD 91.85/bbl from a USD 90.61/bbl low.
• Dutch TTF remained firmer and briefly pushed above EUR 63/MWh, reaching a EUR 63.08/MWh high from a EUR 61.55/MWh low before easing to around EUR 62.36/MWh.
• Precious metals remained subdued as elevated energy prices kept the USD underpinned. Spot gold fell from a USD 4,436/oz high to USD 4,386/oz, near its 100 DMA at USD 4,385/oz, before recovering modestly to around USD 4,391/oz. Spot silver fell from USD 66.56/oz to USD 64.76/oz and traded around USD 65/oz at the time of writing.
• Base metals remained lower across the board. 3M LME copper tested support around USD 14k/t earlier, trading within a USD 13,996.18-14,174.00/t range. COMEX copper subsequently fell from a USD 6.62/lb high to a USD 6.51/lb low and traded near the lower end of the range around USD 6.55/lb.
• Explosions have been reported on the Shaddadi gas pipeline in the outskirts of Hasakah, Syria.
• Saudi Aramco resumed oil loadings from inside the Strait of Hormuz last week, Reuters reported.
• Caspian Pipeline Consortium transported 33.35mln tonnes of crude in H1 (prev. 36.02mln tonnes Y/Y).
• A fuel tanker explosion has been reported in Iraq's Sulaymaniyah complex, YJC reported.

EUROPEAN DATA

• Irish Trade Balance (Jun) 3.5 (Prev. 3.4).
• European ZEW Economic Sentiment Index (Aug) 31.4 vs. Exp. 25.4 (Prev. 23.4).
• German ZEW Current Conditions (Aug) -61.1 vs. Exp. -68.8 (Prev. -77.6).
• German ZEW Economic Sentiment Index (Aug) 34.2 vs. Exp. 30 (Prev. 26.3).
• UK Labour Productivity (Q2 QQ) -0.8% vs. Exp. -0.5% (Prev. 1.1%).
• UK Unemployment Rate (Jun) 4.9% vs. Exp. 4.8% (Prev. 4.9%).
• UK Employment Change (Jun) 83k (Prev. 147k).
• UK Claimant Count Change (Jul) -11.0k vs. Exp. 11.2k (Prev. -6.4k).
• UK Average Earnings excl. Bonus (Jun 3MYr) 3.5% vs. Exp. 3.4% (Prev. 3.4%).
• UK HMRC Payrolls Change (Jul) -13k (Prev. -13k).
• UK Average Earnings incl. Bonus (Jun 3MYr) 4.1% vs. Exp. 4.1% (Prev. 4.4%).
• Spanish Trade Balance (Jun) -7.69 (Prev. -8.24).

NOTABLE HEADLINES

• UK CMA has expressed concern that fuel retailers are failing to pass on wholesale price reductions to drivers, contributing to sustained high margins, reported Sky News; UK watchdog is to launch Autumn review of fuel margins.
• UK grocery inflation eased to 2.1% (Prev. 2.6%) in the four week to August 9th, Worldpanel said. Take-home sales growth at the grocers slowed to 2.5% while grocery price inflation eased to 2.1% in the four weeks to 9th August 2026, marking the lowest rate since October 2024.

TRADE/TARIFFS

• India is reportedly considering cutting its 100% tax on imported sugar to help curb domestic prices, Bloomberg reported.

CENTRAL BANKS

• ECB's Lane said that EZ inflation being one percentage point above the ECB's 2% target, is a lot.
• ECB's Lane said inflation will hover around 3% for the rest of the year; food inflation is relatively low. Reiterates uncertainty.
• PBoC plans to expand Yuan offshore market and is backing the creation of a new model for real estate developments, adds will intensify review of macroeconomic and financial efforts. said:. PBoC will boost international use of the Yuan. Will allow currency swap and yuan settlement to fulfill their functions.

GEOPOLITICS

RUSSIA-UKRAINE

• Western diplomatic source said an increasing number of European politicians are advocating for a resumption of dialogue with Russia, TASS reported.

MIDDLE EAST

• US President Trump posted "There are no talks or conversations going on, or scheduled, with the Islamic Republic of Iran. The Naval Blockade remains in full force and effect. The Hormuz Strait is open and operating". "There are no talks or conversations going on, or scheduled, with the Islamic Republic of Iran. The Naval Blockade remains in full force and effect. The Hormuz Strait is open and operating. All water mines have been removed or detonated. Thank you for your attention to this matter! President DONALD J. TRUMP".
• Iranian Foreign Minister said US' goal from the war is Iran’s surrender, and we will not surrender; adds America is begging to negotiate with us now "according to our terms", Al Jazeera reported. The memorandum of understanding we signed with the United States included 13 items in favor of us and one item in favour of them. Our military and field capabilities are what gave our diplomacy strength in negotiations. We have won the war and diplomacy as well, and we have forced the enemy to accept our terms.
• Saudi enemy artillery reportedly targeted densely populated villages in the Gafera of Al-Thahhar district in Sa'ada, Yemen, according to an Al Masirah News journalist.
• Iran Deputy FM Gharibabadi said "Just as Trump correctly wrote the name of the eternal Persian Gulf, his delusion regarding the Strait of Hormuz will soon be corrected too!".
• Qatari Foreign Ministry Spokesperson said the current effort is focused on defusing the current crisis and returning to the memorandum of understanding, Al Jazeera reported. Mediators are awaiting a bilateral agreement between Oman and Iran on the Strait of Hormuz before resuming broader US-Iran negotiations. Invitation is still open for Iranian delegation to visit on pilots issue. Iran should not involve Qatar in its internal problems.
• Iranian Parliamentary Speaker Ghalibaf said the Strait of Hormuz will not open until the blockade and oil embargo are lifted. Adds, "Iran is ready to inflict a heavier defeat on the enemy than before, in proportion to his actions and encroachments.".
• Yemen's Houthis attacked Saudi Aramco's Jazan refinery with drones, according to Saba news citing sources.
• Syrian Foreign Minister said nuclear material will remain in Syrian custody, subject to IAEA guarantee.
• US President Trump and UAE President discussed the region in a phone call, local press reported.
• COSCO Shipping (1919 HK) and CMES have reportedly stopped sending oil tankers through the Strait of Hormuz and Bab al-Mandeb, sources suggest.
• Israeli fighter jets were responsible for the attack on the Abu al-Duhur Airbase in northwest Syria, which was the first Israeli strike inside Syria since July 2025, according to Jerusalem Post's Stein.

NORTH AMERICAN DATA

• US Capacity Utilization (Jul) 76.3% vs. Exp. 76.3% (Prev. 76.2%).
• US Manufacturing Production (Jul YY) 1.2% (Prev. 1.1%).
• US Manufacturing Production (Jul MM) 0.2% vs. Exp. 0.2% (Prev. 0.3%).
• US Redbook (Aug/15 YY) 7.6% (Prev. 8.3%).
• US Import Prices (Jul YY) 5.9% (Prev. 7.1%).
• US Import Prices (Jul MM) -0.4% vs. Exp. 0.1% (Prev. -0.3%).
• US Building Permits Prel (Jul) 1.443 vs. Exp. 1.37 (Prev. 1.374).
• US Export Prices (Jul MM) -1.3% vs. Exp. 0.2% (Prev. -0.7%).
• US Export Prices (Jul YY) 8.2% (Prev. 10.2%).
• US Building Permits Prel (Jul MM) 5.0% (Prev. -2.6%).
• US ADP Employment Change Weekly 9.5K (Prev. 8.25K).
• Industrial Production (Jul MM) 0.2% vs. Exp. 0.3% (Prev. 0.3%).
• Industrial Production (Jul YY) 1.1% (Prev. 1.1%).
• Housing Starts (Jul MM) -12.4% (Prev. 19.0%).
• Housing Starts (Jul) 1.239 vs. Exp. 1.35 (Prev. 1.427).