Blog week ending, 21st August 2026
Markets:
- Local and global equity markets came under pressure, as concerns grew on rising oil prices and higher bond yields.
- US government bond yields moved higher, pressuring equity markets. The increase reflected concerns around growing government debt levels, rising oil prices, persistent inflation pressures, and the Fed’s reluctance to raise rates.
- Bond yields subsequently fell sharply after the US Treasury announced plans to double the size of its buyback program for longer-dated securities, helping to ease market concerns around bond market liquidity and supply.
- Japan’s 10-year government bond yield jumped to 2.93%, reaching its highest level since 1996, amid growing expectations for an imminent Bank of Japan rate hike.
- In local stock news, National Australia Bank’s profit climbed in the third quarter as lending to businesses across the country expanded. Cash earnings came in at $1.83 billion for the period, although home loan applications were down 15%.
- Consumer discretionary stocks came under pressure after JB Hi-Fi shares fell sharply despite delivering a decent annual profit result and record group sales of $11.1 billion, as trading at its Australian stores dipped.
- CSL forecast no revenue growth and underlying net profit after tax growth of about 5% for FY2027, signalling another subdued year as the company pushes ahead with a sweeping restructure. Investors responded positively to the update.
- The Australian dollar strengthened against the US dollar, as the latter fell to three-month lows.
- Gold prices moved higher as the precious metal and store of wealth saw support, driven by a weaker US dollar and falling US government yields.
- Oil prices continued to rise, supported by escalated conflict in Lebanon and indications from both the US and Iran of no negotiations, raising concerns about ongoing supply disruptions.
Economy:
- The Australian unemployment rate ticked up to 4.5% in July as the participation rate fell back. Employment fell 16,000, following two months of strong growth.
- Australian consumer sentiment jumped 6% in August, accelerating from a 4.1% rise in the prior month and marking its fastest gain since November 2025. Confidence improved broadly across households, although sentiment remains below levels seen a year ago.
- Australian wages increased 0.8% in the June quarter, extending a run of five consecutive quarterly increases. Annual wage growth held steady at 3.2% as expected, though this was the slowest pace since late 2024, reflecting softer growth in private sector wages.
- US government debt outstanding exceeded US$40 trillion for the first time, some four and half years after reaching US$30 trillion. Net interest payments totalled US$963 billion over the first ten months of the 2026 fiscal year, accounting for around 15% of government spending.
- Minutes from the Federal Reserve’s July meeting revealed growing support for higher interest rates, with several policymakers favouring a rate increase and many indicating further tightening may be needed if inflation remains elevated. Rates were left on hold in a 9-3 vote.
- US retail sales fell 0.6% in July, significantly underperforming expectations for a 0.1% rise and reversing June’s 0.2% gain. It was the first monthly decline since October 2025 and the biggest fall since May last year.
- US consumer sentiment deteriorated sharply in August, well below forecasts, ending two consecutive months of improvement. Concerns about rising inflation and weaker business conditions weighed heavily on confidence.
- US housing starts dropped by 12.4% from the previous month, substantially more than expected and leaving construction activity close to six-year lows as higher borrowing costs continued to pressure the market.
- The Eurozone economy grew 1% year on year to the June quarter of 2026, accelerating from an upwardly revised 0.5% in the previous quarter. Strong AI-related investment, resilient government spending, and one-off factors helped offset the impact of the Iran war.
- Eurozone annual inflation rose to 2.9% in July, in line with estimates and up from the 2.8% recorded in June, remaining well above the European Central Bank’s target. Higher energy prices were the primary driver of the increase.
- Preliminary figures showed Japan’s economy expanded at an annualised 1.1% in the June quarter, below market expectations of 2%, as weak domestic demand offset strong exports.
- China’s retail sales grew just 0.6% versus the same time last year, missing expectations and slowing from June’s 1.0% growth rate, despite support from summer holiday tourism spending.
- China’s industrial output in July rose 4.5% on the year, slowing from 5.3% in June and falling short of forecasts as weaker domestic demand and extreme weather conditions weighed on activity.
Politics:
- President Trump indicated he is willing to consider Australia’s request for either a full exemption from US tariffs or, at a minimum, no further increase to tariffs.
- The conflict in Lebanon intensified, recording its deadliest day of fighting in months, adding further pressure to already stalled US-Iran negotiations. At the same time Washington is preparing a fresh round of sanctions aimed at increasing pressure on Iran economically.
- The 60-day window under the US-Iran memorandum of understanding expired this week without formal negotiations on Iran’s nuclear program or sanctions relief commencing, according to Iran’s Foreign Ministry. President Trump also confirmed that the US is not currently engaged in talks with Iran and has no immediate plans to resume negotiations.
This information is general advice and does not take account of investors’ objectives, financial situation or needs. Before acting on this general advice, investors should therefore consider the appropriateness of the advice having regard to their objectives, financial situation or needs.
Written by Christopher Lioutas
Chairman – Harbourside Investment Management
