Markets in August returned to a more positive tone, with global equities recovering from the weakness seen in July. Resilient economic data and another strong corporate earnings season outweighed renewed concerns around inflation, interest rates and geopolitical risk. Developed and emerging-market equities both gained, while Brent crude remained close to $90 per barrel as tensions between the US and Iran continued.

Equity markets delivered broad gains. The S&P 500 rose, where technology shares rebounded as the latest earnings results confirmed that investment in artificial intelligence infrastructure remains exceptionally strong. Nvidia gained around 10% after reporting quarterly revenue more than double the level of a year earlier. Market leadership also broadened beyond the largest technology companies, with materials and energy among the strongest sectors. Japan performed particularly well, while emerging Asian markets advanced despite continued weakness in China, where domestic demand was subdued.

Bond markets were more mixed. Softer US employment data early in the month initially reinforced expectations that the Federal Reserve could remain patient. However, Federal Reserve Chair Kevin Warsh struck a more hawkish tone at Jackson Hole, emphasising that inflation remained too high and had not improved sufficiently. Shorter-dated Treasury yields moved higher as expectations of further rate rises increased, while longer-dated yields eased after the US Treasury announced that it would at least double the size of its long-maturity bond buybacks from September. German and Japanese government bond yields reached fresh highs, although corporate bonds performed well and high-yield spreads narrowed to their lowest level in a year.

Commodity markets were also notable. Gold rose by around 10%, supported by a weaker dollar and renewed concerns around fiscal sustainability and currency debasement, although weakness was seen towards the end of the month. Oil remained volatile as continued geopolitical tension was balanced by the absence of a further material deterioration in global supply. European natural gas prices rose to their highest level of the year, reflecting low inventories and continuing disruption to energy infrastructure.

Economic data suggested that global growth had regained some momentum. Flash business surveys across the US, eurozone, UK and Japan recorded their strongest combined expansion since April 2022, led by improving services activity. The US remained the strongest major developed economy, although the latest payroll report showed a modest decline in employment while unemployment remained at 4.1%.

Overall, strong earnings and AI-related investment continue to support markets, but elevated valuations, tight credit spreads, persistent inflation and geopolitical uncertainty leave relatively little margin for disappointment.