Morning Brew August 31 2026

Good morning.

The market starts the week with a hawkish Jackson Hole message, higher rate expectations, renewed Middle East stress and payrolls ahead on Friday.

Federal Reserve Chair Kevin Warsh delivered a hawkish message at Jackson Hole. He said inflation remains too high, reaffirmed the Fed’s 2% target, described the U.S. economy and labour market as broadly resilient, and refused to provide explicit forward guidance. Markets were left with a simple message: incoming data will matter more than Fed promises.

U.S. equities ended Friday weaker after Warsh’s remarks triggered a tech-led selloff. The S&P 500 fell 0.3% to 7,711.76, the Nasdaq Composite dropped 0.5% to 26,402.42, and the Dow slipped less than 0.1% to 53,559.99. Nvidia fell 4.6%, PayPal tumbled 12.7% after Stripe and Advent International abandoned their USD 53 billion bid, and Marvell also retreated after results failed to clear a high bar. Amazon, Microsoft and Apple outperformed.

Rates moved higher, particularly at the front end of the curve. The 2-year Treasury yield rose around 8 basis points as traders reassessed the probability of another Fed move, while the 10-year is trading around 4.71%. Fed funds futures now price the probability of a September hike at around 60%, up from roughly one-third before the speech.

FX reflects the same repricing. The USD Index is at 99.65, EUR/USD at 1.1590, GBP/USD at 1.3540 and USD/JPY near 159.80. USD/CHF is around 0.8090. Gold fell after the hawkish Fed message and is trading around 4,425, while silver dropped back to the 66 handle.

The Middle East is back in focus this morning. Reports point to renewed exchanges of fire, and a supertanker on fire. Oil is around USD 90 in the UK line, while major European indices are indicated roughly 0.3% lower. Donald Trump posted that Kharg Island is being blown to smithereens, Reuters said that the accompanying video clip showing dramatic explosions was most likely synthetically-generated.  It seems likely that he mistook Kharg and Larak, while Kharg is the Iraninan oil hub, Larak is less economically important.

As the Iran war reaches the six-month mark, the longer-term fallout is becoming more visible. China’s three largest state-owned airlines reported first-half losses for a seventh consecutive year, hit by higher jet-fuel costs.

Gold is trading around 4,425 and silver near 66.35. Bitcoin remains around the 78,000 level.

U.S. Treasury Secretary Scott Bessent said recent yen moves were “pretty well contained”, suggesting Washington does not yet view the latest yen weakness as disorderly enough to require another joint intervention.

The yen nevertheless remains sensitive after moving below 160 per dollar on Friday, a level markets continue to watch for potential intervention risk.

In other macro news, Iceland rejected EU-accession talks in a close referendum, while China’s factory activity improved in August on stronger demand but remained in contraction. Services activity also stayed weak.

In Switzerland, lawmakers are expected to decide later today on capital rules for UBS and send a watered-down banking bill to the upper house of parliament.

The focus this week is on Iran, rates and Friday’s U.S. nonfarm payrolls. Consensus expects a rebound of 58,000 jobs after July’s 23,000 drop, with unemployment seen unchanged at 4.1%. A much weaker number would probably be needed to reduce the risk of a September Fed move meaningfully.

Bessent also faces a busy week of economic diplomacy as he presses G20 finance leaders to reduce global trade imbalances, support growth and cut business ties with Iran, while trying to calm concerns around U.S. debt and bond yields.

Tomorrow brings the last key euro-area data point before next week’s ECB decision. Markets currently price the probability of a hike at around 97%.

Later this week, Broadcom, Dell and Palo Alto Networks are the key global earnings names.

Monday, 31 August 2026
Macro: German CPI; month-end flows and positioning after Jackson Hole.
Central banks / speakers: G20 finance ministers meet in the U.S.
Corporate earnings: Light European calendar; M&G, InPost and Bakkafrost among the names reporting.

Tuesday, 1 September 2026
Macro: Euro-area flash HICP inflation and unemployment; final manufacturing PMIs for the euro area, Germany and the UK; U.S. ISM Manufacturing PMI and JOLTS job openings.
Central banks / speakers: RBA rate decision.
Corporate earnings: Broadcom expected.

Wednesday, 2 September 2026
Macro: Euro-area building permits; U.S. ADP employment report.
Central banks / speakers: Bank of Canada rate decision.
Corporate earnings: No major global large-cap focus.

Thursday, 3 September 2026
Macro: Final services and composite PMIs for the euro area and Germany; euro-area PPI; U.S. initial jobless claims and trade balance; U.S. ISM Services PMI.
Corporate earnings: Dell and Palo Alto Networks expected.

Friday, 4 September 2026
Macro: Euro-area retail sales; U.S. nonfarm payrolls, unemployment rate and average hourly earnings; Canada employment report.