U.S. equities opened the week on the defensive as broad technology and semiconductor weakness weighed on sentiment ahead of a heavy macro and earnings calendar, before a sharp drop in oil on easing Middle East supply fears fuelled a Tuesday relief rally; gains stalled midweek as a firmer July Personal Consumption Expenditures (PCE) print revived inflation concerns and investors sat on their hands ahead of Nvidia, whose strong outlook, alongside Salesforce’s guidance, drove a broad Thursday advance that consolidated Friday ahead of Warsh’s Jackson Hole address. Canada outperformed early on energy and materials strength but lagged midweek as falling crude weighed on producers, with in-line Q2 GDP doing little to shift direction. European markets, cushioned by lower technology exposure, were undermined Thursday by French fiscal concerns before recovering. Asian markets were mixed, with Korea reversing on the Bank of Korea’s second consecutive hike.
Highlights:
U.S. equities closed -1.40%1 lower as semiconductor weakness and a firmer PCE reading capped early gains, but Nvidia’s fiscal 2028 revenue outlook and encouraging Salesforce guidance powered a late-week technology-led advance before markets paused ahead of Warsh’s keynote.
Canadian equities finished -0.28%² lower with early gains led by energy and materials, then gave ground as a sustained crude selloff hit producers. A solid Q2 GDP print erased the prior technical recession and left the market little changed into Friday.
European equities slid -0.46%3 with limited technology exposure and cheaper energy supporting the region for much of the week, though French fiscal credibility questions ahead of the televised presidential debate triggered a Thursday setback that largely reversed the following session.
Emerging market equities ended 0.46%⁴ higher, with Samsung’s shareholder return disappointment driving a heavy Monday selloff, after which insider buying at Alibaba restored sentiment; Korean shares later surrendered Nvidia-inspired gains as the Bank of Korea’s rate hike was absorbed.
Trade shock, then inflation: a two-part week for sovereign bonds
U.S. Treasuries opened the week firmer, with the long end leading as reports that the US Treasury may tap its General Account to fund long-dated bond buybacks, which pushed yields to session lows, a move extended Tuesday as crude fell below $90 and eased inflation expectations. By mid-week, this move reversed when a firmer headline PCE (July) print drove front end Treasuries to sell off despite a third day of falling oil prices. Resilient jobless claims and a widening trade deficit lifted intermediate yields Thursday and positioning ahead of FOMC Chair Warsh nudging the curve higher Friday morning with his Jackson Hole speech.
Canadian bonds rallied hard Monday as the collapse of US/Canada trade talks over the weekend triggered a flight to safety trade and then retraced as they tracked Treasuries higher. European yields fell early, then rose as French fiscal concerns and hot Spanish and French CPI reports reinforced ECB hike expectations in September. Japanese yields drifted higher throughout the week on Bank of Japan monetary policy normalization.
Highlights:
The 2- and 10-Year U.S. Treasury yields both rose 9 basis points (bps) for the week. In Canada, the 2- and 10-year sovereign yields were 11 bps and 14 bps higher, respectively. Bond yields and prices move inversely to one another.
Sovereign direction hinged on the handoff from oil-driven disinflation to firmer inflation prints, with the U.S. front end repricing after PCE (July) while French OATs underperformed on fiscal scrutiny and long-dated JGBs sold off into a weak auction.
Canadian sovereign rallied sharply Monday on the collapse of Canada–U.S. trade talks before tracking Treasuries higher, with Friday’s Q2 GDP beat versus the Bank of Canada’s July forecast lifting yields modestly and keeping 2026 hikes in play.
Weekly dashboardCanadian GDP beats the odds amid tariff turmoil
Canada’s economy proved more resilient than expected, with the second-quarter GDP print confirming a robust rebound that stood in sharp contrast to the escalating trade backdrop. Even as the U.S. imposed fresh tariffs and Canada prepared to retaliate, growth came in well above the Bank of Canada’s (BoC) own projection, underscoring the strength of domestic demand. Perhaps the most notable takeaway was that the technical recession previously believed to have occurred over the prior two quarters was revised away, reframing the narrative around Canada’s economic trajectory. The strong momentum keeps the door open for BoC rate hikes later this year, though considerable uncertainty remains given ongoing tariff risks.
Highlights:
Q2 GDP grew 3.3% quarter-over-quarter annualized, just shy of the 3.4% consensus but the strongest pace since 2023, and well above the Bank of Canada’s 2.5% projection from its July report.
The technical recession was revised away, as Q1-26 was lifted to a 0.3% gain from an initial -0.1% decline, meaning the previously assumed 4Q25–1Q26 downturn never actually happened
Growth was broad-based, driven by a 15.1% jump in exports, a 3.3% rise in household consumption, and a 12.3% increase in business investment, while June monthly GDP rose 0.3%.
U.S. inflation holds above target as Warsh signals Fed still has “work to do”
U.S. inflation showed little acceleration in July but remained well above the Federal Reserve’s 2% objective, and Chair Kevin Warsh used his first Jackson Hole keynote on Friday to make clear that the central bank is not yet satisfied. While the July personal consumption expenditures report released Wednesday was slightly firmer than expected on a headline basis and in line on core, Warsh said recent readings, though better than anticipated, do not indicate underlying trends have meaningfully improved. Declining to offer forward guidance or an explicit reaction function, he nonetheless affirmed 2% PCE inflation as a firm, fixed target and short-term rates as the predominant tool, prompting markets to raise the odds of a September rate hike.
Highlights:
Headline PCE rose 0.2% month-over-month, above the 0.1% consensus, and held at 3.7% year-over-year. Core PCE rose 0.2%, in line with consensus, and was unchanged at 3.3% year-over-year, with the 2-year Treasury yield leading the subsequent move higher.
Nominal personal income rose 0.4% month-over-month, ahead of the 0.2% consensus, while inflation-adjusted spending was flat as Prime Day and FIFA World Cup tailwinds faded. The personal savings rate rose to 3.0% from 2.6%.
Warsh said he would be “hard pressed” to describe financial conditions as restrictive and that the Fed’s predominant focus should be on prices. Traders moved to price a 57.5% probability of a September hike, up from 35.4% before the speech, per CME FedWatch.
Firmer European inflation and rising energy costs point to tighter ECB policy ahead
Euro area inflation data surprised to the upside at the end of the week, reinforcing expectations that the European Central Bank (ECB) will raise rates in September. Spanish CPI accelerated to 4.5% year-over-year in August, the fastest pace since 2023, while French CPI also exceeded expectations. The releases came alongside a renewed climb in European natural gas prices and hawkish commentary from ECB officials earlier in the week, a combination that lifted sovereign yields across the region and marked a shift from the disinflationary tone that characterised much of 2026.
Highlights:
Spanish CPI reached its fastest annual pace since 2024 and French CPI also beat expectations, lifting European government bond yields by roughly 1.5 to 2.4 basis points across the curve. Germany’s 10-year rose 2.4 basis points to 3.28% and France’s 2.2 basis points to 4.13%.
European natural gas prices climbed above €70 per megawatt-hour, a five-month high, adding to inflation concerns even as crude fell roughly 9% on the week. The euro weakened despite the Brent decline, an unusual break from the region’s terms-of-trade relationship.
The data fit a broader global pattern of inflation surprises skewing higher. Of the nine G10 countries reporting July CPI, four exceeded consensus on annual headline inflation and none surprised to the downside, a shift from the earlier trend this year.
1 S&P 500 Index USD
2 S&P/TSX Composite Index USD
3 Bloomberg Developed Markets ex N. America Large & Mid Cap Price Return Index USD
4 Bloomberg EM Large & Mid Cap Price Return Index USD
by Scotia Wealth Management | The Zukiwsky Group