The Cambridge Weekly – 17th August

Global markets processed the news that the yen had given up roughly half of its gains since the US-Japan intervention after it sank last week. This sparked renewed attention in Tokyo and conversation around what more would be needed to create a sustained upswing in the yen to preserve global market stability, given the intervention already reflected a rarely seen joint move from both government treasuries. Elsewhere, industry-standard measures of market volatility continued to fall as investors are appearing to become less wary of ongoing tensions in the Middle East, and focused instead on economic data and corporate earnings, sparking warnings that investors may be becoming complacent to the threat of disruption. This came amidst the news that fees paid by shipping companies to transit through the Panama Canal hit a fresh record recently, and that US strategic stockpiles had hit a 40-year low, signalling that the effects of the middle east conflict continue to be felt worldwide.

In Europe, energy markets remained under scrutiny after the extreme temperatures experienced in the recent heatwaves drove demand for cooling, and pushed gas prices to near levels seen at the height of the Iran conflict.

In Asia, China remained in focus after heightened concern about potential new export restrictions on certain rare earth materials, after news emerged that some rare earth metals had jumped by a third over the past 2 months. Specialist rare earth metals like erbium, which is used in fibre-optic infrastructure and nuclear technology, have risen sharply in price amid fears of tighter supply.

US Equity Market:

AI continued to dominate the headlines as a consortium of Wall Street banks and investors, including the likes of Blackstone and Blackrock, have helped Nvidia raise $500bn in capital to build its artificial intelligence infrastructure. This came amidst the news that Bank of America has committed $250bn to US projects across AI data centres, energy and transport networks, and is expected to roll out this capital commitment over the next 18 months. On the software front, news revealed that the investors in Anthropic, the AI company famed for the Claude LLM, expect the AI startup to float at a valuation of $2tn or more as early as October, which would make it the largest IPO of all time. Elsewhere, the head of Boston central bank, a key official for the federal reserve, said that poorer Americans are struggling to make ends meet, and also signalled intent to back a September interest rate rise if inflation remains hot.

In political news, it was revealed last Wednesday that Ukraine shifted focus away from tankers using Russian ports following a request from the US, with the rationale being this aspect of the conflict was further destabilising oil markets and harming US companies. In markets, the S&P500 closed the week to Friday up 0.4%, with the lower inflation figure adding an extra boost to the index already buoyed by the performance of tech stocks Supermicro and CoreWeave. The stocks, which provide hardware and AI cloud space respectively, were up 19% and 14% after their earnings, with both beating Wall Street expectations on financial performance.

UK Equity Market:

UK economic data provided encouragement after official figures showed the economy expanded by 0.4% during the second quarter of 2026, in line with economist expectations. Growth was supported by the services and construction sectors, with June activity also benefiting from warm weather and increased consumer spending from the World Cup. The figures suggested that the UK economy has remained relatively resilient despite geopolitical disruptions.

The energy sector had a mixed week of news, with Scotland’s North Sea oil revenues dropping by 12% to £3.2bn in the 2025-26 year, particularly interesting to note given an industry regulator last week said that oil companies in the basin would have to speed up the closure of their wells to meet deadlines. The Department of Energy Security also revealed last week that households within 500 metres of UK grid upgrade projects would benefit from lower electricity bills over 10 years, a move taken as part of the larger drive to decarbonise.

In markets, luxury department store chain Harvey Nichols was saved from collapse by a £40 million deal by the Fraser group following a few years of rough trading, but the group chief warned there would be significant restructuring of Harvey Nichols as it integrated into the business. The FTSE100 closed the week to Friday down 1.1%, driven primarily by weakness in the mining sector where Antofagasta, Rio Tinto and Anglo-American shares fell 5%, 4.5% and 3.2% last Thursday after the former cut its 2026 copper output forecast. This offset any positive effects from the stronger than expected economy growth of 0.3% in June. Sterling currently trades at around 1.35 against the dollar.

Inflation, Interest Rates and Bond Markets:

In the US, the July consumer price inflation (CPI) report revealed that inflation had slowed in line with expectations to 3.4% in the year to July, down from 3.5% in the year to June. US treasuries reacted positively to the reading as the yield on the 10-year cooled from 4.70% to the 4.64% level by Thursday, as the market sentiment shifted away from interest rate hikes in the near term. As a reminder, yields move inversely to prices.

UK 10-year gilt yields started last week at the 5.00% mark before marginally falling to the 4.96% mark on Thursday off the back of a stronger-than-expected GDP data release earlier in the week.

What’s on the horizon

Geopolitical developments in the Middle East will continue to be a focus for investors this week.

In macroeconomic data, July’s CPI report for the UK and the Eurozone is due to be released and this will provide investors with another snapshot into the macroeconomic status of the two regions. There will also be a focus on unemployment data, as both the UK and China are set to release their July unemployment rates.

In the US, the minutes of the most recent Federal Reserve Open Market Committee meeting are due to be released this week. Investors will be awaiting to see whether these minutes will reveal further guidance regarding the future path of US interest rates. US crude oil inventories data will also be released on Wednesday, a point of note given ongoing events in the Middle East.

This material has been written on behalf of Cambridge Investments Ltd and is for information purposes only and must not be considered as financial advice. We always recommend you seek financial advice before making any financial decision.

Past performance is not a guide to future performance.

The value of your investments can go down as well as up and you may get back less than you originally invested.

Source of financial market data: MorningstarDirect.