Weekly Market Review - 03 August 2026

Risk assets remained broadly resilient last week, with gains across major developed markets driven by robust earnings and improving technology sentiment. While concerns remain around inflation, higher bond yields and slowing economic growth.

US: Strong corporate earnings support equities as inflation continues to concern and AI related Volatility persist

U.S. equities ended the week mixed as investors navigated the Federal Reserve's latest policy decision, geopolitical tensions and continued volatility in AI-related stocks. While the S&P 500, Nasdaq and Dow posted modest gains, smaller companies lagged. Technology shares came under pressure early in the week amid concerns over elevated AI spending and growing competition, before rebounding following stronger than expected results from Microsoft and robust Azure cloud growth. The Federal Reserve left interest rates unchanged, although a rare split 9-3 vote highlighted ongoing inflation concerns. Economic data offered a mixed picture, with core inflation easing modestly but second quarter GDP growth slowing and consumer confidence weakening. Meanwhile, long-dated Treasury yields moved higher, reflecting continued uncertainty over the outlook for growth, inflation and monetary policy.

Japan: Policy tightening expectations support markets as earthquake uncertainty weights on sentiment

Japanese equities declined over the week, with sentiment weighed down by uncertainty surrounding the economic and supply chain impact of the powerful earthquake in Kyushu. Similar to the FED, the Bank of Japan left interest rates unchanged, although signs of a growing willingness to tighten policy further helped keep expectations of a potential September rate increase alive. Meanwhile, a sharp appreciation in the yen fuelled speculation of official currency intervention, highlighting ongoing concerns around yen weakness. Economic data presented a mixed picture, with Tokyo inflation accelerating and reinforcing evidence of persistent price pressures, while retail sales growth slowed sharply, pointing to more subdued consumer demand.

China: Targeted stimulus expectations support equities as concerns over AI valuations weigh on technology stocks

Chinese equity markets delivered a mixed performance over the week, with mainland shares coming under pressure as a global sell off in AI-related stocks weighed on semiconductor and technology names, while Hong Kong outperformed on the back of gains in large internet companies such as Tencent and Alibaba. Investor sentiment was initially boosted by the strong market debut of memory chip maker CXMT, highlighting continued enthusiasm for China's technology self-sufficiency agenda, although concerns around valuations and the profitability of AI related investment later triggered broader weakness across the sector. Policymakers reiterated their commitment to targeted fiscal and monetary support, with the Politburo signalling further measures to support domestic demand and strategic industries but stopped short of unveiling large scale stimulus. Economic data in China was less encouraging, with manufacturing activity returning to contraction and services activity weakening, reinforcing concerns that domestic demand and broader economic momentum remain subdued despite ongoing policy support.

Europe: Strong earnings support equities as inflation pressures and policy uncertainty persist

European equities advanced over the week, supported by stronger than expected corporate earnings, a recovery in sentiment towards AI related stocks, and lower oil prices. Major markets posted gains, led by Germany and France, as investors responded positively to signs of resilience in the regional economy. Eurozone growth surprised to the upside in the second quarter, helped by continued investment in technology and robust government spending, although inflation edged higher in July, highlighting ongoing price pressures. In Germany, economic growth exceeded expectations despite a rise in unemployment and softer domestic demand. Overall, the data reinforced the view that the eurozone economy remains resilient, even as investors continue to monitor the outlook for inflation, growth and monetary policy.

UK: FTSE 100 rises as investors welcome stable rates and supportive market conditions

UK equities remained resilient over the week, with the FTSE 100 gaining 1.23%, supported by stronger corporate earnings, improving sentiment towards technology related sectors and relatively stable energy prices. Monetary policy remained in focus as the Bank of England left interest rates unchanged at 3.75%, while signalling that renewed geopolitical tensions could pose upside risks to inflation through higher energy costs. Meanwhile, the UK housing market showed signs of moderation, with annual house price growth slowing in July. Overall, investors were encouraged by resilient market performance but continued to monitor the outlook for inflation, interest rates and the broader economic impact of global geopolitical developments.

What’s Important Next: 3 August to 7 August 2026

Will the US jobs number kill the rate hike story or supercharge it?

On Friday, the US releases its July non-farm payrolls report, the single most important data point of the week.

Why it’s important

The Federal Reserve left rates on hold at its most recent meeting, with Chairman Kevin Warsh deliberately offering no forward guidance on the path ahead, a clean break from the Yellen and Powell era of telegraphing every move. That silence has transformed every major data release into a live market event. With two inflation prints and two employment reports still to come before the September Federal Open Market Committee meeting, Friday's payrolls number carries unusual weight.

The backdrop is genuinely tense. Geopolitical risk from the US-Iran conflict has kept oil elevated and inflation sticky, and there is a meaningful faction within the Fed that favours rate hikes. Non-farm payrolls are expected to rebound from June's soft reading, with the unemployment rate potentially nudging up to 4.3% and hourly wage growth holding steady.

If payrolls come in hot, say, above 200,000, and wages surprise to the upside, the rate hike camp gets fresh ammunition and Treasury yields, already at their highest since January, could push higher still. Equities, which have been rattled by the inflation-oil nexus, would likely sell off. Conversely, a weak number gives the doves cover, yields ease, and the dollar softens in a relief rally, but one that may prove short-lived given the broader inflationary environment. Bottom line: Friday is not just a data release, it is effectively a shadow Fed meeting.

Big tech quartet report earnings, but AI capex is what really matters

This week sees Apple, Amazon and Meta of the so-called Magnificent Seven, report their second quarter earnings results.

Why it’s important

Earnings season is already running hot. European companies are on track for their strongest season in years, with beats outnumbering misses at a net-weighted skew of 45%. But the US mega-cap tech cohort is in a different league entirely: these four names alone account for a disproportionate share of S&P 500 index weight and have been the primary engine of the bull market. The stakes this quarter, however, go well beyond revenue and EPS. The market's central question is whether the extraordinary wave of AI-related capital expenditure is translating into real revenue, or whether it is becoming a cost burden that eventually pressures margins.

Investors will be scrutinising guidance on AI infrastructure spending with particular intensity. If any of the four signals a slowdown in capex or disappoints on cloud growth, the read-across to the broader AI trade, including semiconductors, data centres, power infrastructure, could be severe and swift. On the other hand, strong results with bullish AI commentary would provide a powerful counterweight to the macro anxiety dominating bond and FX markets this week. With US equities already losing some of their shine amid the rates-and-oil squeeze, these four reports could either stabilise sentiment or accelerate the wobble. Bottom line: the earnings are important, but the capex commentary is the real market-mover.

Yen on a knife-edge: has the intervention era just begun?

The yen and Japanese government bond markets remain in sharp focus this week, following last week's unprecedented, coordinated US-Japan currency intervention, a 10-year Japanese Government Bond (JGB) auction on Tuesday, and a 30-year offering on Thursday.

Why it’s important

Last week, the US and Japan conducted their first joint currency intervention in 15 years, with both governments warning they would not "hesitate" to act again after the yen hit a four-decade low. The yen has since swung sharply, rallying as much as 1.4% against the dollar in early Monday trading before paring gains, a sign that markets remain deeply jittery and that speculative positioning is far from settled. The Bank of Japan will also release the minutes of its June Monetary Policy Meeting on Tuesday, which will be parsed for any hawkish signals on the pace of rate normalisation.

The structural story here is profound. Japanese yields have been playing catch-up with the rest of the G7 for years, and the 10-year JGB now sits close to 3%, a level unthinkable just two years ago. The JGB auctions this week are therefore not routine: in an environment where domestic investors are being nudged toward repatriation and the tax treatment of JGBs is under discussion, demand at these auctions will signal how much further yields could rise. A weak auction would push yields higher, strengthen the yen further, and create ripple effects across global fixed income, Japanese investors remain among the largest holders of US Treasuries and European bonds. A strong auction steadies the ship. Bottom line: the yen and JGB market are no longer a sideshow, they are one of the most consequential fault lines in global markets right now, and this week's auctions and BOJ minutes could move both.

Issued by Omnis Investments Limited. This update reflects Omnis’ view at the time of writing and is subject to change. The document is for informational purposes only and is not investment advice. We recommend you discuss any investment decisions with your financial adviser. Omnis is unable to provide investment advice. Every effort is made to ensure the accuracy of the information, but no assurance or warranties are given. Past performance should not be considered as a guide to future performance.