European Market Wrap - 20th August 2026

European bourses held a negative bias, with US equity futures also opening lower across the board.
Long-end yields have rebounded from Wednesday's lows, as fiscal concerns and geopolitical uncertainty remains.
Iranian Supreme Leader adviser Rezaei said "The best response to Trump's escalation of economic warfare is to withdraw from the NPT (Nuclear Non-Proliferation Treaty).

EQUITIES

European bourses look set to end Thursday's trade with a negative bias, with Italy's FTSE MIB the only index printing modest gains. The continued pullback throughout the session comes in line with the rebound in global bond yields, with the US 30yr yield completely retracing the move seen in Wednesday's move.
Sectors had a clear negative tilt, with Energy and Utilities the only sector posting gains. The sector laggard was Basic Resources, as metals continued to pare Wednesday's gains (spot gold -1.0%). Consumer Products & Services and Retail round out the sector underperformers.
Key movers included: JD Sports (-14.8%), cut its FY27 pretax profit guidance; Aegon (-3.5%), despite H1 metrics beating estimates and increased its current share buyback programme; Novonesis (+9.4%), Q2 revenue and Adj. EBITDA beat and announced an inaugural share buyback programme; Brenntag (-3.2%), reinitiated with underperform at BofA.
US cash equities opened lower across the board. On the earnings front, the US biggest retailer Walmart reported its Q2 metrics. Despite Adj. EPS and Revenue beating estimates, its comp sales ex.gas missed by 1ppt and its Q3/FY Adj. EPS guidance also missed consensus, which has driven shares lower by 8%.
Sticking with retailers, Chinese online retail giant Alibaba reported Q1 earnings before the US market open. EPS missed estimates while revenue beat forecasts ever so slightly. Despite the 9% jump in revenue, net income slumped 76%, which resulted in an initial reaction of 3% losses in its US ADR before opening with losses of 5% CEO highlighted that its Cloud external revenue growth accelerated to 45%, with AI-related product revenue delivering triple-digit growth for the 12th straight quarter.

USD - DXY remained modestly softer for most of the session before trimming losses to around flat levels. This followed yesterday's broad-based USD weakness following the surprise Treasury announcement, which drove significant curve flattening. Price action was interesting today as DXY remained capped despite the rise in energy. Fed's Daly did little to shift the index during her interview. DXY looks to notch a 98.56-98.90 range after falling under its 200 DMA (99.17) yesterday.
EUR - EUR/USD held an upward bias, firmer as a contained Dollar and higher energy (particularly European gas) prices continued to support the pair, briefly pushing above 1.1700 earlier in a 1.1669-1.1714 range. Bloc-specific catalysts remained light.
GBP - Sterling outperformed, with GBP/USD rising to a six-month high around 1.3660 before easing back towards 1.3650 (1.3595-1.3660 range). The move was supported by a broader subdued Dollar, rising energy prices, whilst some also cite relative economic resilience in the UK.
JPY - JPY underperformed despite the subdued broader Dollar backdrop for most of the session, with USD/JPY rising towards 158.80 after rising back above its 200 DMA (158.27). Rising energy prices continue to weigh on Japan's terms of trade.
Antipodeans - AUD was weaker amid softer copper and gold prices and after disappointing Australian labour data, where employment contracted and unemployment rose, prompting AUD/NZD to find support just below 1.1950 (vs high 1.2018). As such, NZD fared considerably better against the softer Dollar.

FIXED

Global fixed benchmarks are lower after starting the European session around the unchanged mark. Yields gradually rose throughout the day, as markets assigned some risk surrounding a number of hawkish geopolitical updates (see commodities for details), which helped lift crude benchmarks.
For yields specifically, the US 30yr yield has almost entirely pared the downside seen following the Treasury’s long-end buyback announcement on Wednesday. It now sits at around 5.24% (vs recent highs of 5.33%), and that will be a cause of concern for the Treasury. In an earlier note, ING opined that it is “unlikely” that the 10yr will fall below 4.5%, but believes it is “clear” that any move above 5% “or even the material threat thereof” would receive active resistance by the US Treasury.
On the data front, US Jobless Claims printed a touch short of expectations at 206k (exp. 210k); this essentially confirms the low-fire, low-hire environment that the US has been in for some time.
Bunds (+3 ticks) and Gilts (-19 ticks) traded mixed, with domestic newsflow lacking. Gilts came under mild pressure as the session progressed, amidst the rise in crude benchmarks.
France sold EUR 12.5bln vs exp. EUR 10.5-12.5bln 2.40% 2029, 2.70% 2031, 3.25% 2032 and 3.00% 2034 OAT.

COMMODITIES

Crude futures extended their gains as the session progressed amid heightened US-Iran tensions. Trump yesterday sharply escalated economic pressure on Tehran, threatening severe secondary sanctions on countries, banks and companies assisting Iran, while reiterating that Iran cannot obtain a nuclear weapon. Tensions were further heightened this morning after Iranian Supreme Leader adviser Rezaei suggested Iran should respond by withdrawing from the NPT, while reports suggested the Houthis are preparing a new escalation against Saudi Arabia. Al Arabiya and Al Hadath also reported that Trump believes the chances of an Iran deal have become slim and could consider major strikes if economic pressure fails, although markets treated the local Arab media reports cautiously. WTI rose from a USD 84.23/bbl low to a USD 87.69/bbl high, while Brent climbed from a USD 91.47/bbl low to a USD 94.71/bbl high and traded around USD 93.61/bbl.
Dutch TTF strengthened as the session progressed alongside the broader geopolitical risk premium in energy, rising from a EUR 63.38/MWh low to a EUR 65.66/MWh high and traded around EUR 65/MWh.
Precious Metals remained softer despite the weaker USD, with the complex pulling back from yesterday's US Treasury-induced gains while also facing pressure from higher oil prices. Spot gold fell from a USD 4,527/oz high to a USD 4,451/oz low, moving back below its 200 DMA at USD 4,512/oz. Spot silver fell from a USD 67.31/oz high to USD 65.64/oz before recovering to north of USD 66.50/oz.
Base Metals remained under pressure as higher energy prices weighed on the complex. 3M LME copper earlier tested USD 14k/t to the downside before eventually giving up the level to trade within a USD 13,918.78-14,083.00/t range.
European gas prices hit EUR 65/MWH for the first time since March.
Saudi Aramco sold at least 4mln bbls of crude loading outside Hormuz to China, according to sources.
China state-run refiners have reportedly bought a combined 10mln barrels of Saudi crude in a tender, Bloomberg reported.

EUROPEAN DATA

UK CBI Industrial Trends Orders (Aug) -25 vs. Exp. -40 (Prev. -45).
European Labour Cost Index Flash (Q2 YY) 3% (Prev. 3.2%).
European Construction Output (Jun YY) -0.7% (Prev. 0.7%).
German PPI (Jul YY) 3.0% vs. Exp. 2.7% (Prev. 1.8%).
German PPI (Jul MM) 1.1% vs. Exp. 0.7% (Prev. -0.3%).

NOTABLE HEADLINES

Bundesbank Monthly Report: the consequences of low water levels on major waterways are likely to temporarily slow the recovery of the German economy.

TRADE/TARIFFS

USTR Greer and Canadian negotiators are to meet at 12:15 ET (17:15 BST) in Washington.
China is said to be restricting or delaying exports to Taiwan of key materials used in optics and semiconductor manufacturing, Nikkei sources report. Germanium- and quartz-based materials as well as some magnets affected, sources say.
China's MOFCOM urges the US to withdraw Section 232 related tariffs.

CENTRAL BANKS

Fed's Daly (2027 voter) said a rise in long-term bond yields is a global issue, which reduces its usefulness as a signal for Fed. YIELDS. Making the case that the short end is reacting to the data. Yields show market understands the Feds reaction function. US TREASURY ANNOUNCEMENT QUESTIONS. Avoid question, said Fed has a dual mandate and they have the tools to achieve their ends. Reiterates the Fed is focused on its job with regards to its dual mandate. Do not want to worry about the mechanics, outcome is more important. INFLATION. Modal outlook expects for inflation pressures to fade, but noted that we could have further shocks in the future that could change that situation. Within the inflation data the technology price gains there a small part of the overall indices; don't see that pushing into price inflation at large, will be looking to see if this spills over into consumer prices. Does not think it is correct to talk about the risks of higher inflation; Fed still has to watch these things. POLICY. Policy is in a good place. She is watching markets. Reiterates that she was supportive of the July hold. Not seeing signs of any worrisome dynamics forming ahead of the FOMC. Still in a good place to keep watching the data. LABOUR MARKET. Sticky service pricing and shocks is one of the reasons that labour market conversation has been where it is. Reiterates she doesn't see the job market contributing to inflation at the moment. Describes labour market as low-hire, low-fire, adds this is an uncomfortable stability that the Fed is not used to. CONSUMERS. Consumer is still spending, however it is slowing. Does not see anything fragile yet. CREDIBILITY. Does not see Fed credibility at risk.
BoK names Kwon Min-Swoo as Senior Deputy Governor.
Riksbank's Thedeen said they are somewhat concerned about the recent inflation outcomes. Swedish Economy is showing signs of strength.
Riksbank maintains its rate at 1.75% as expected; assesses that the probability of a rate increase later this year remains; there is considerable uncertainty and developments call for vigilance.

GEOPOLITICS

RUSSIA-UKRAINE

Romania’s Defence Minister said an F-16 destroyed an unmanned surface vessel heading toward the Neptun Deep gas project in the Black Sea, while Ukraine confirmed the vessel was not part of its armed forces.
Ukraine’s military said it struck Russia’s TANECO oil refinery and an oil terminal in the Krasnodar region.
IAEA said it was informed that the 330 kV Ferrosplavna-1 power line at the Zaporizhzhia Nuclear Power Plant was disconnected.
Russia attacked military facilities and a logistics hub in Kyiv and the region, while it also hit a drone component production facility in Kyiv, according to Russian newswires, quoting the Defence Ministry. Russia also bombed warehouses in Black Sea ports of Chornomorsk and Pivdennyi late Wednesday. Targeted an ammunition depot in Kyiv.

MIDDLE EAST

There’s no talk about military escalation against Iran at this point, and the president is focused primarily on strangling Iran economical, reported Politico citing a Senior WH Official. That means Treasury Secretary Scott Bessent is more involved in the war than Defense Secretary Pete Hegseth at this point, the official indicated.
Qatar said its efforts are currently focused on mediating between the US and Iran, Al Jazeera reported.
UKMTO said it received a report of an incident 136NM east of Mukalla, Yemen.
The US administration believes that the Iran-Oman discussions broke down weeks ago, Semafor reported citing an official source.
US President Trump "told his negotiating team that the chances of an agreement with Iran have become slim", Al Arabiya reported, citing sources. Trump ordered a freeze on negotiations with Iran for several weeks, with the possibility of extending them. The administration has/was:. seen reported of an Iranian plan to resume attacks on ships. briefed on information regarding a potential Houthi escalation in Bab al-Mandab. briefed on an Iranian plan for operations that go beyond targeting ships. informed, by Trump, of the possibility of launching massive attacks on Iran if economic pressure fails.
Yemeni sources report that Houthis are preparing to enter a new phase of escalation against Saudi Arabia, Tasnim reported. "Yemeni sources reported that Sanaa is preparing to enter a new phase of escalation against Saudi Arabia after announcing the creation of three military equations, ranging from naval blockade to deep attacks, and raising its demands in exchange for a halt to operations.".
North Korea's Kim Yo‑jong said South Korea’s description of drill reduction is “nothing but a lame excuse”.
US CENTCOM said US Sailors work on the flight deck of USS George Washington (CVN 73), Aug. 20, as the aircraft carrier transits the Arabian Sea. The George Washington Carrier Strike Group is operating in Middle East during a scheduled deployment after arriving in the CENTCOM theatre yesterday.
Senior Iranian lawmaker Azizi warns foreign forces to leave the region "before it's too late" , Press TV reported.
Turkish Defence Ministry said that they will continue to support Syria's efforts to develop their own military capability.
Japan said North Korea fired what could be a ballistic missile; South Korea said North Korea's military fired an unidentified projectile towards the east sea; missile has landed outside of Japan's Exclusive Economic Zone.
Iranian Supreme Leader adviser Rezaei said "The best response to Trump's escalation of economic warfare is to withdraw from the NPT [Nuclear Non-Proliferation Treaty].".
Israeli Channel 12, citing sources: The security establishment is closely monitoring the activity of the Turkish fleet in the Mediterranean Sea, Al Araby TV reported; Turkish ships approached Israeli ships several times in international waters.
Iranian Foreign Minister Araghchi said that insisting on failed policies will only lead to more failures and will lead to hostility from Iranians.
Iranian Central Bank Governor said that Iranian oil exports have stopped, and we are no longer exporting oil at all.

NORTH AMERICAN DATA

US Jobless Claims 4-week Average (Aug/15) 204.0K (Prev. 199.75K).
US Initial Jobless Claims (Aug/15) 206.0K vs. Exp. 210K (Prev. 212.0K).
US Continuing Jobless Claims (Aug/08) 1799.0K vs. Exp. 1790K (Prev. 1781.0K).
US Philly Fed CAPEX Index (Aug) 48.20 (Prev. 30.10).
US Philadelphia Fed Manufacturing Index (Aug) 47.4 vs. Exp. 25 (Prev. 41.4).
Philly Fed Business Conditions (Aug) 73.6 (Prev. 34.4).
US Philly Fed New Orders (Aug) 30.1 (Prev. 37.0).
US Philly Fed Employment (Aug) 27.9 (Prev. 10.0).
US Philly Fed Prices Paid (Aug) 40.90 (Prev. 53.90).