By Josh Clayton, Assistant Portfolio Manager at Blackfinch
As at 24th August, 2026
Global markets took a more cautious turn last week as higher oil prices, renewed geopolitical tensions and rising government bond yields brought inflation risks back into focus.
At the centre of the move was the US bond market. Longer-term Treasury yields rose sharply, with the 30-year yield reaching its highest level since 2007. Investors were increasingly focused on the US fiscal outlook and the volume of government borrowing, while higher energy prices added to concerns that inflation could remain elevated for longer.
The move in bond markets added to a more cautious backdrop for risk assets. Technology and semiconductor shares also came under pressure during the week, as investors reassessed valuations following a strong period for AI-related companies. Together, the moves highlighted how sensitive markets remain to changes in growth, inflation and interest-rate expectations.
A Mixed Picture in the UK
The UK labour market continued to soften. Data from the Office for National Statistics and HMRC showed payrolled employment fell by a further 13,000 in July, while the unemployment rate remained at 4.9%.
At the same time, inflation rose to 2.9%, with higher regulated energy costs contributing to the increase.
For the Bank of England, that creates a difficult balance. Softer employment and easing wage pressures point towards weaker domestic momentum, while inflation remains above target. Cutting rates too quickly could risk adding to price pressures, but keeping policy restrictive for too long could place further strain on the economy.
UK equities were relatively resilient, helped by their greater exposure to energy, financials and other value-oriented sectors.
US Growth Holds Up, but Yields Take the Spotlight
Despite concerns in bond markets, US economic activity remained firm.
S&P Global’s flash Composite Purchasing Managers’ Index rose to 56.0 in August from 54.5, its strongest reading since April 2022. Services led the improvement, while employment also strengthened and business confidence reached a nine-month high.
Selling-price pressures eased, although input costs remained elevated with businesses continuing to contend with higher energy prices and supply-chain disruption.because of energy prices, tariffs and ongoing supply-chain disruption.
Federal Reserve minutes from the July meeting reinforced a cautious stance. Policymakers continued to highlight upside inflation risks, supporting the view that monetary policy may need to remain restrictive for longer.
Housing provided a contrast, with pending home sales falling further as elevated mortgage rates and affordability pressures continued to weigh on activity.
Attention now turns to the Jackson Hole Economic Policy Symposium, where markets will be looking for more clarity on how the Federal Reserve intends to respond if growth remains resilient while inflation risks persist.
Europe Improves as Asia Softens
Europe offered a more encouraging picture. Eurozone business activity strengthened modestly in August, while new business improved and employment rose for the first time this year. Price pressures also eased, giving the European Central Bank a somewhat more favourable balance between growth and inflation.
German sentiment improved too, helped by stronger corporate results, resilient exports and expectations around infrastructure spending.
In Asia, the picture was more subdued. Chinese industrial production and retail sales both slowed, while weakness in fixed-asset and real-estate investment continued to highlight the drag from the property sector.
Japan also delivered mixed signals. Economic growth slowed more than expected in the second quarter, while inflation accelerated, strengthening the case for a near-term Bank of Japan rate increase.
Asia Balances Softer Growth and Inflation Pressures
In China, inflation pressures eased in July. Consumer inflation slowed to 0.5% year-on-year, while producer-price growth also cooled.
However, the wider growth picture remained subdued, with weak domestic demand and continued pressure in the property sector. Beijing introduced further measures aimed at supporting housing activity.
In Japan, inflation pressures remained more prominent. Wholesale prices rose 7.2% year-on-year in July, strengthening expectations that the Bank of Japan could tighten policy again.
Japanese equities were supported by strong technology and semiconductor-related earnings, while the weaker yen continued to help exporters. Currency volatility and the prospect of further policy tightening nevertheless remain important considerations.
Helping Advisers and Clients Adapt to Change
Weeks like this show why investing is about more than reacting to individual headlines. Higher yields, changing inflation expectations, energy prices and differing regional growth trends all interact to shape the wider picture.
At Blackfinch Asset Management, we believe strong adviser relationships are an important part of navigating that change.
We thrive on working closely with advisers, understanding their clients and making sure they have access to the investment expertise, context and communication they need as markets evolve.
That does not remove market uncertainty. But it can help advisers explain what is happening, put short-term movements into context and give clients greater confidence in the long-term plan they have put in place.
For us, adapting to changing markets goes hand in hand with maintaining strong relationships. By staying close to advisers throughout the investment journey, we can help them support their clients through different market conditions rather than only being there when markets are calm.
Markets will continue to change. Strong portfolios matter, but so does having an investment partner alongside you as they do.
Sources: Bloomberg, Reuters, Yahoo Finance, The Guardian, Proactive Investors, BBC, Oxford Economics, FactSet
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