Morning Brew August 3 2026

Good morning.

Welcome to August. We start the new month on a more constructive note, helped by fresh hopes around the Middle East, firmer equity futures and renewed confidence that the AI trade still has momentum. The bigger question is whether this becomes a sustainable start to the month or just another relief move in a market that remains highly sensitive to yields, oil, FX intervention risk and crowded positioning.

Key things to watch:

The Middle East remains the main headline risk. Renewed talks around Iran and the Strait of Hormuz are helping oil move lower for now, but the region remains a key source of volatility for energy prices, inflation expectations and supply chains.

Global yields are still doing the heavy lifting. Long-end U.S. yields remain uncomfortable for highly valued growth stocks and AI infrastructure names. If yields rise again, the market may quickly move from relief to renewed pressure.

The AI trade is alive, but increasingly volatile. Can it stabilise? Charu took a look at the implications from the recent selloff below.

Last but not least, we need to talk about the weather. Record temperatures across Europe are beginning to leave a visible mark on the economy, reducing labour productivity, disrupting transport networks, weighing on agricultural yields and pushing river levels lower. The latter is particularly concerning, as it threatens both hydropower generation and the cooling of nuclear power plants, adding further pressure to Europe's energy system

Japan remains firmly on the radar. Japan and the United States confirmed coordinated yen-buying intervention after USD/JPY briefly pushed to fresh four-decade highs. Since Thursday, USD/JPY has fallen from around 163 to 156. Can they hold the level, or will yen weakness come back?

In FX, the USD Index is below 100, with EUR/USD around 1.1540 and GBP/USD near 1.3475. The softer dollar is helping risk sentiment, but the yen remains the key pressure point. Gold is stable around 4,070, silver near 58.10, and Bitcoin around 62,000.

Oil is lower on renewed Iran-related talks. That is positive for inflation expectations, but it remains a headline-driven market. Any setback in negotiations or renewed disruption around the Strait of Hormuz could quickly bring the risk premium back.

On the company side, AstraZeneca and Bristol Myers Squibb have reportedly held preliminary discussions about a possible combination that would create one of the world’s largest pharmaceutical companies, with a combined value of nearly USD 400 billion. If confirmed, this would be a major healthcare transaction and another sign that large-cap pharmaceutical consolidation remains a theme.

U.S. equities started August on a firmer note. On 1 August, the S&P 500 rose 0.7%, the Dow gained 0.5%, and the Nasdaq-100 added 0.6%. Amazon surged around 15% after strong earnings, helping to offset a sharp 7.4% decline in Apple, its largest single-day market-cap loss on record at roughly USD 358 billion, driven by chip-related concerns. The UBS Hyperscaler basket rose nearly 7%, and U.S. equity futures are pointing higher in early Monday trade, supported by Iran deal optimism and renewed AI relief. In Europe, the Stoxx Europe 600 reached a record high in July, gaining 1.2% for the month and extending its winning streak to a fourth consecutive month. Europe continues to benefit from a lighter technology weighting and heavier exposure to value and banks, allowing it to pull ahead of the S&P 500 year-to-date.

This morning, the DAX is expected at 25,900 and the SMI at 14,400.

Donald Trump said talks with Iran will take place on Monday, but declined to set a firm deadline for an agreement. Earlier, he had said he called off an imminent attack in the hope of securing a deal to reopen the Strait of Hormuz and resolve the dispute over Tehran’s nuclear capabilities. For markets, the situation is simple: peace headlines lower oil and support risk; any breakdown could quickly reverse both moves.

Trump had said late on Saturday on his Truth Social platform that Iran and other Middle Eastern countries had asked for time to complete a deal that would lead to "the Immediate, Complete and Total" reopening of the strait and "an end to Iran's nuclear threat" but that Tehran must "rapidly make a DEAL."  Oil prices skidded and stocks wobbled on Monday as hopes of a peace deal in the Middle East grew, while the yen jumped suddenly again after the U.S. and Japan confirmed joint intervention to prop up the frail currency.

- China is energetically defending its economic policy mix that favours advanced industries over consumption, adopting a posture analysts see as demonstrating increasing confidence ahead of looming trade talks with Europe and the United States.

President Xi Jinping and U.S. counterpart Donald Trump plan more face-to-face meetings this year, while Brussels has set an October deadline for Beijing to settle disputes as worries grow over China's trillion-dollar-plus trade surplus.

Japan's manufacturing output expanded in July at its fastest pace in more than 12 years, with across-the-board improvements in sub-indexes, including a 4.5-year high surge in new orders buoyed by AI-related demand, a survey showed on Monday.

Global investors pulled back from South Korean stocks through a wild turn in July but are keeping faith with the heavyweight chipmakers on the view that their growth momentum is intact, while leveraged holdings that rocked the market may have thinned out.

In a sign of the shift in mood, a record rally on Friday showed foreigners, who have been net sellers of South Korean shares all year, turned buyers of 7.2 trillion won ($5 billion) worth of stock, more than double the previous one-day record.

Charu took a look at the implications of the fallout from the massive fall in Korean Equities:

When euphoria meets reality Lessons from the July KOSPI crash | Saxo

• The KOSPI selloff and the collapse of Leopold Aschenbrenner's AI fund tell the same story: when strong conviction is combined with excessive concentration and leverage, even a temporary market correction can quickly spiral into forced selling and heavy losses.
• A compelling investment theme is not enough. AI remains a powerful long-term opportunity, but investors still need to pay attention to valuation, position sizing, diversification and the risks of chasing momentum.
• Long-term investing is about surviving market cycles. The goal is not to maximise returns in every rally, but to manage risk well enough to stay invested and benefit from the opportunities that follow.

Trade Carefully!!

Key dates in August:

• 7 Aug: US Nonfarm Payrolls & Unemployment Rate

• 12 Aug: US CPI
• 13 Aug: US PPI
• 14 Aug: US Retail Sales
• 19 Aug: FOMC Minutes
• 27–29 Aug: Jackson Hole Economic Symposium
• Late Aug: US GDP revision and PCE inflation data

Earnings reports that matter most in August:

• Palantir (3 Aug): A key gauge of AI software demand and government spending.
• Eli Lilly (5 Aug): Critical for the obesity-drug theme and broader healthcare sector.
• Disney (5 Aug): A read on consumer spending, streaming and travel demand.
• Berkshire Hathaway (7 Aug): Closely watched for Warren Buffett’s market positioning and cash levels.
• Cisco (12 Aug): A useful indicator for enterprise technology and AI infrastructure spending.
• Home Depot (18 Aug): One of the best reads on the US consumer and housing market.
• Target (19 Aug): Important for US discretionary spending trends.
• Walmart (20 Aug): Perhaps the single most important consumer earnings report of the month.
• Nvidia (26 Aug): The marquee event of the month and arguably the most important earnings release globally given its role at the centre of the AI investment cycle.

Monday, August 3, 2026
Macro: U.S. ISM Manufacturing PMI and construction spending.
Corporate earnings: Marriott International, Tyson Foods, Palantir, Vertex Pharmaceuticals, Snap, ON Semiconductor and Diamondback Energy.

Tuesday, August 4, 2026
Macro: U.S. JOLTS job openings.
Central banks / speakers: Reserve Bank of Australia rate decision.
Corporate earnings: Spotify, BioNTech, BP and several major European and U.S. companies.

Wednesday, August 5, 2026
Macro: U.S. ISM Services PMI; ADP employment report.
Central banks / speakers: No major central-bank decision scheduled.
Corporate earnings: Eli Lilly, Disney, Uber and several large-cap reporting names.

Thursday, August 6, 2026
Macro: U.S. initial jobless claims; Q2 productivity and unit labour costs; Challenger job-cut report.
Central banks / speakers: Alberto Musalem speaks; Fed balance sheet after the close.
Corporate earnings: ConocoPhillips, Parker-Hannifin, Howmet Aerospace, Canadian Natural Resources, Datadog, Constellation Energy, Petrobras, Cloudflare, Monster Beverage, Airbnb, Aflac and Republic Services.

Friday, August 7, 2026
Macro: U.S. Employment Situation report for July, including nonfarm payrolls, the unemployment rate and average hourly earnings; U.S. consumer credit later in the day.
Central banks / speakers: Thomas Barkin speaks.
Corporate earnings: Vistra, Take-Two Interactive, PPL, Plains All American Pipeline, Emera, Fluor and Hawaiian Electric.