Markets in August
US equities markets appeared to have largely ignored turmoil caused by US President Trump’s So far this month the S&P 500 is +2.24%, the Dow Jones is +2.92% MTD, and the Nasdaq 100 +1.50% MTD. European equity markets have had a generally positive month with the STOXX 600 being +1.58% MTD. Even the UK, suffering from rising concerns around fiscal policy change in the autumn statement, had a very positive month with the FTSE 100 +4.07% MTD.
In the bond market, yield steepening continued in reaction to attacks on the pace of Fed policy change and on individual Fed policymakers with markets with the longer end of the curve most affected. The dollar is -1.87% MTD and down about -9.45% YTD.
The UK BoE cut rates in August to 4% in a 5-to-4 decision, with Governor Andrew Bailey citing "genuine uncertainty" on its next move.The decision was made after a second vote, with two senior officials voting against Bailey. However, forecasts warn inflation is expected to rise to 4% in September. Uncertainty around which taxes will be raised to cover the government’s estimated £50 billion budget black hole has affected confidence and raised stagflation concerns..
The economic picture
In the US headline inflation rose by 0.2m/o/m in July, and 2.7 % annualised, while core CPI, excluding food and energy, was at 0.3% m/o/m and 3.1% annualised, respectively. The US labour market showed a significant drop off as the nonfarm payroll numbers for July showed only 73,000 new jobs created. In addition the June and May numbers were downgraded, with June’s changed from an initial 147K to just 14K, while May's reading was also reduced by 125K. Unemployment was 4.2% in July, slightly up from June’s 4.1%. Real average hourly earnings were up 0.1% in July. The labour force participation rate was 62.2%, which is down 0.5% over the year. The employment-population ratio was 59.6%.
On the growth front August PMIs showed US business activity improving. The August Flash Composite PMI was 55.4, an increase from 55.1 in July, an 8-month high. It was the manufacturing sector leading the growth for the month, rising to 53.3 from July’s 49.8 and a 39 - month high. The Flash Services PMI fell slightly to 55.4, from July’s 55.7. As noted by Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, “While this upturn in demand has fuelled a surge in hiring, it has also bolstered firms’ pricing power. Companies have consequently passed tariff-related cost increases through to customers in increasing numbers, indicating that inflation pressures are now at their highest for three years. The resulting rise in selling prices for goods and services suggests that consumer price inflation will rise further above the Fed’s 2% target in the coming months. Indeed, combined with the upturn in business activity and hiring, the rise in prices signalled by the survey puts the PMI data more into rate hiking, rather than cutting, territory according to the historical relationship between these economic indicators and FOMC policy changes.” Despite the rise in business activity, consumer confidence fell by 1.3 points in August to 97.4, down from 98.7 in July, which was revised up by 1.5 points. The Present Situation Index—based on consumers’ assessment of current business and labour market conditions—fell by 1.6 points to 131.2. The Expectations Index—based on consumers’ short-term outlook for income, business, and labour market conditions—decreased by 1.2 points to 74.8. Expectations remained below the threshold of 80 that typically signals a recession ahead. The University of Michigan's preliminary Consumer Sentiment index for August 2025 fell to 58.6 from July's 61.7. This was below market forecasts and was attributed to increasing worries about inflation
In the UK, inflation was higher than expected in July at 3.8% from June’s 3.6%. It was the fastest pace since January 2024. Services inflation climbed to 5%, above the BeE’s 4.9% forecast. Core inflation was 3.8% annualised, up from 3.7% in June due to accelerated inflation in both goods and services prices. On the growth front, the S&P Global Composite PMI came in at 53.0, up from July’s 51.5 and a 12-month high. The Flash Services PMI was also up and at a 12-month high, coming in at 53.6 from July’s 51.8. However, the Flash Flash Manufacturing PMI hit a 3-month low, coming in at 47.3, down from July’s 48.0. According to Chris Williamson, the demand environment remains both uneven and fragile. Companies report concerns over the impact of recent government policy changes, and unease emanating from broader geopolitical uncertainty. Payroll numbers also continue to be cut at an aggressive rate. Consumer confidence was up in August with the GfK Consumer Confidence Index up by two points to -17 in August. Neil Bellamy, Consumer Insights Director at GfK, said: “The biggest changes in August are in confidence in personal finances, with the scores looking back and ahead a year each up by three points. This is likely due to the Bank of England’s August 7th cut in interest rates, delivering the lowest cost of borrowing for more than two years. The improved sentiment on personal finances is welcome, but there are many clouds on the horizon in the form of inflation – the highest since January 2024 – and rising unemployment.” He noted that consumers remain in a ‘wait and see’ mode
The UK labour market is still weakening with the number of payrolled employees falling by 149,000 (0.5%) between June 2024 and June 2025, and by 26,000 (0.1%) between May 2025 and June 2025.135,000 (0.4%). According to the Office for National Statistics, the annual growth in average regular pay (excluding bonuses) in the UK was 5.0% in the period April to June 2025, while total earnings (including bonuses) grew by 4.6% over the same period.
The eurozone economy appears to be improving. Eurozone inflation remained stable at 2% in July. Core inflation, which excludes energy, food, tobacco and alcohol prices, was unchanged at 2.3% in July. Services inflation eased to 3.1% from June’s 3.3%.
On the growth front, eurozone HCOB Composite PMI came in at 51.1 from 50.9, marking a 15-month high and indicating continued economic expansion. The HCOB Flash Services PMI fell to 50.7 from July’s 51.0, signifying sluggish domestic demand. The HCOB Flash Manufacturing PMI jumped from 50.6 to 52.3, a 41 month high. Hiring was also up with eurozone companies continuing to take on additional staff in August. The latest rise in employment was still only modest, but quickened to the fastest since June 2024. Inflationary pressures picked up in August, with both input costs and output prices increasing at faster rates than in July. Also, business confidence declined for the second consecutive month in August. Sentiment dropped to a four-month low. As noted by, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, “Things are getting better. Economic activity has picked up in both manufacturing and services. Overall, we’ve seen a slight acceleration in growth over the past three months. Despite headwinds like US tariffs and general uncertainty, businesses across the eurozone seem to be coping reasonably well. The EU Single Market is likely playing a helpful role here, especially since most export and tourism revenues are generated within the EU.”
Global market indices
USA:
S&P 500 +2.24% MTD and +10.20% YTD
Nasdaq 100 +1.50% MTD and +12.15% YTD
Dow Jones Industrial Average +2.92% MTD and +6.75% YTD
NYSE Composite+3.29% MTD and +10.66% YTD
The Equally Weighted version of the S&P 500 is +2.72% so far in August, 0.48 percentage points higher than the benchmark.
The S&P 500 Materials sector is the top performer so far in August at +5.56% MTD, while Utilities has underperformed at -0.81% MTD.
On Wednesday, major US stock indices closed slightly higher, with the S&P 500 reaching its 19th record close of the year. The S&P 500 rose by +0.24% to 6,481.40, while the Nasdaq Composite saw a modest increase of +0.21%. The Dow Jones Industrial Average added 147.2 points, closing at 45,565.23, its second-highest close on record.
In corporate news, J.M. Smucker announced it would continue to raise coffee prices to mitigate the impact of tariffs on its costs. The company, which owns brands such as Folgers and Café Bustelo, reported a fiscal first-quarter loss, with profits from its retail coffee division declining by 22% y/o/y. Despite this, net sales for the unit increased by 15% due to the higher prices.
Cracker Barrel announced its decision to revert to its previous logo following a negative public response to its recent rebrand.
Williams-Sonoma raised its full-year sales growth target after a strong Q2 performance across all its brands, which helped to allay concerns about the potential impact of increased tariffs on imported furniture.
Boeing has conveyed confidence to Ryanair Holdings that it will be able to increase its 737 production rates by the end of October, according to the Irish airline's CEO.
HP provided a profit outlook for Q3 that exceeded expectations. This positive forecast suggests firming demand for personal computers and growing consumer interest in new machines equipped to run the latest AI software.
Royal Bank of Canada surpassed analyst estimates, driven by strong performance across its core businesses and a lower-than-expected provision for potential loan losses. This marks a significant recovery from notable credit misses earlier in the year.
Europe:
Stoxx 600+1.58% MTD and +9.29% YTD
DAX -0.08% MTD and +20.78% YTD
CAC 40 -0.36% MTD and +4.92% YTD
FTSE 100 +1.46% MTD and +13.37% YTD
IBEX 35+4.33% MTD and +29.55% YTD
FTSE MIB+4.07% MTD and +24.77% YTD
Source: FactSet
In Europe, the Equally Weighted version of the Stoxx 600 is +1.13% MTD, 0.35 percentage points less than the benchmark.
The Stoxx 600 Autos & Parts is the leading sector, +4.90% MTD, while Technology has exhibited the weakest performance at -1.72% MTD.
On Wednesday, within the STOXX Europe 600 sectors, the healthcare sector emerged as the day's strongest performer, driven by gains in pharmaceutical and biotechnology companies. Cosmo Pharmaceuticals shares increased following a positive opinion from the Committee for Medicinal Products for Human Use (CHMP) for its Winlevi acne treatment. Similarly, BioVersys gained momentum after its tuberculosis treatment received orphan designation from the European Medicines Agency (EMA). Medical equipment names also contributed to the sector's strength, with a particular focus on Agfa-Gevaert following its Q2 earnings and restructuring plans.
In response to political risks in France, investors rotated into defensive sectors, supporting Utilities. Telecommunications also traded modestly higher, supported by safe-haven positioning as investors sought clarity on the French political impasse. Technology settled higher as investors’ focused on Nvidia's Q2 earnings report.
Banks underperformed within the STOXX 600. Italian banks' shares fell following reports that the government may once again consider a tax on their profits. Deutsche Bank and Commerzbank shares fell after being downgraded by Goldman Sachs. French banks extended their declines as political risk intensified with the pending confidence vote for French Prime Minister Bayrou on 8th September.
The retail sector was broadly softer after a weak German consumer sentiment survey revealed rising fears of job losses. The basic resources sector also underperformed, despite small gains for Rio Tinto and Anglo American, which benefited from restructuring news and developments at De Beers. Rio Tinto's new CEO also announced a significant three-unit revamp of the company.
Global:
MSCI World Index+2.63% MTD and +12.77% YTD
Hang Seng+1.85% MTD and +26.43% YTD
Mega cap stocks had mixed performance in August MTD. Tesla +13.41%, Apple +11.04%, Alphabet +8.12%, and Nvidia +2.10%, while Amazon -2.13%, Meta Platforms -3.37%, Microsoft -5.02%.
Nvidia Q2 earnings. On Wednesday, Nvidia reported record-breaking sales, as the company continued to capitalise on robust demand for AI computing. However, the company's subdued outlook for future demand tempered investor enthusiasm.
Nvidia's Q2 revenue reached $46.7 billion, aligning closely with analyst expectations. Revenue from the crucial data-center segment, which includes the company's most powerful chips used for training and refining AI models, increased by 56% to $41.1 billion. While this represents significant growth, it fell slightly short of the $41.3 billion that analysts had projected. The company's Q2 net income was $26.4 billion, a 59% y/o/y increase. For Q3, Nvidia forecasts revenue of $54 billion, which is slightly higher than the consensus analyst estimate.
Following the announcement, Nvidia's shares declined in after-hours trading. This was likely due to the lukewarm revenue outlook and the narrow miss in the data-center business's revenue forecast. This marked the second consecutive quarterly miss for this segment, which accounts for 89% of the company's total sales. The previous miss, however, occurred before analysts had fully adjusted their targets to account for lost revenue from China.
During the earnings call, Nvidia CEO Jensen Huang projected that major AI companies would spend between $3 trillion and $4 trillion over the next five years, based on their current capital expenditure levels. He suggested Nvidia could capture up to 70% of that market. Huang also highlighted the ‘extraordinary demand’ for the company's new Blackwell line of GPUs, its most powerful chips to date, noting a 17% increase in sales compared to the previous quarter. The company announced that Disney, Hitachi, Hyundai Motor, and SAP are among the first customers for its Blackwell-edition servers.
Significant uncertainties continue to cloud Nvidia's future in China. The company halted production of its H20 chip after the Chinese government advised customers against purchasing it. According to CFO Collette Kress, the company did not sell any new H20 chips in Q2 and is not projecting any revenue from this product in Q3 due to ongoing geopolitical issues. The company stated that the lower-than-expected data-center revenue was partly a result of a $4 billion reduction in H20 sales during the quarter.
In a move to enhance shareholder value, Nvidia authorised $60 billion in new stock repurchases, a significant acceleration of its buyback program. The company had already repurchased $24.3 billion of its stock in H1 and had $14.7 billion in additional authorised purchases remaining at the end of Q2. For FY 2025, the company's non-GAAP gross margin guidance is in the mid-70% range. The Q2 non-GAAP gross margin was 72.7%, surpassing the FactSet consensus of 72.0%.
During the earnings call, Nvidia addressed several key themes. The company discussed how Agentic AI is driving a significant increase in computational needs, thereby enhancing the effectiveness and applications of AI in enterprise settings.
They also highlighted the new NVLink 72 system, which is expected to boost speed, energy efficiency, and cost-effectiveness in AI computations. The introduction of Spectrum-XGS is designed to improve data center connectivity, positively impacting the efficiency and economics of AI factories.
Nvidia also plans to release annual updates to the Rubin platform to maximise customer revenue through performance improvements in AI capabilities.
The company is also focusing on Sovereign AI Investments, noting that nations are increasingly investing in developing their own domestic AI capabilities, and on sustainability, with an increased emphasis on energy-efficient technologies for data centers.
Energy stocks have experienced a mostly positive performance so far in August, with the Energy sector +1.67% MTD. Energy Fuels +24.90%, Apa Corp +17.11%, Phillips 66 +7.32%, Occidental Petroleum +6.67%, Chevron +5.01%, Marathon Petroleum +4.52%, ConocoPhillips +2.69%, ExxonMobil +0.99%, and Shell +0.17%, while Halliburton -0.45%, and Baker Hughes Company -0.60%.
Materials and Mining stocks have had a mixed performance in August MTD. The Materials sector is +5.56% MTD. Albemarle +29.23%, Newmont Mining +16.57%, Freeport-McMoRan +9.02%, and Nucor Corporation +5.07%, while Yara International -3.98%, Celanese Corporation -9.71%, Mosaic -7.00%, and Sibanye Stillwater -9.36%.
Commodities
Gold is +3.15% MTD as renewed hopes for a Fed interest rate cut materialised in August, coupled with ongoing trade policy uncertainty. Gold is +29.41% YTD.
Gold prices were largely stable on Wednesday as investors awaited upcoming inflation data for indications on the future path of interest rate cuts. This cautious sentiment prevailed amidst ongoing concerns regarding the Fed's independence, which arose after the US President attempted to dismiss a Fed Governor.
Gold, being a zero-yield asset, typically performs well in a low-interest rate environment and is often viewed as a hedge against economic and political uncertainty. Spot gold remained unchanged +0.00% at $2,393.38 per ounce. The previous day, gold prices had climbed to a more than two-week high following the news of President Trump's attempt to dismiss Governor Lisa Cook.
Oil prices were mixed on Wednesday, with market movements influenced by a larger-than-expected decline in US crude inventories and concerns over new US tariffs on India.
Brent crude futures rose by 52 cents, or +0.77%, to settle at $67.79 per barrel. In contrast, WTI crude futures declined by 52 cents, or -0.82%, to $62.79. Both contracts had experienced a drop of more than two percent on Tuesday. WTI is -9.33% MTD and -11.06% YTD and Brent -6.56% MTD and -9.16% YTD.
The US government's decision to double tariffs on imports from India up to 50% took effect on Wednesday. These tariffs, imposed in response to India's continued purchases of Russian oil, have not yet caused a supply disruption. However, the uncertainty surrounding potential US actions against oil flows is discouraging some traders from taking new positions.
Additionally, escalating attacks on energy infrastructure by both Russia and Ukraine have raised concerns among traders about potential supply disruptions. Ukrainian officials reported a massive Russian drone attack on energy and gas transport infrastructure across six regions. In recent days, Ukraine has also conducted strikes on Russian oil refineries and export infrastructure.
EIA report. According to the latest EIA weekly report, US crude oil, gasoline, and distillate inventories all decreased due to increased demand last week.
Crude inventories declined, falling by 2.4 million barrels to a total of 418.3 million barrels for the week ending 22nd August. Stocks at Cushing, Oklahoma, a key delivery hub, also dropped by 838,000 barrels.
Gasoline stockpiles decreased by 1.2 million barrels to 222.3 million barrels. Similarly, distillate stockpiles, which include diesel and heating oil, fell by 1.8 million barrels to 114.2 million barrels.
Demand for gasoline, measured by ‘gasoline supplied,’ increased to 9.24 million barrels per day (bpd) from 8.84 million bpd the previous week. Demand for distillate fuel oil also rose, reaching 4.14 million bpd, up from 3.97 million bpd.
Despite the rise in demand, refinery crude runs decreased by 328,000 bpd, and the utilisation rate fell by two percentage points to 94.6%. However, this utilisation rate remains significantly higher than the 91.9% reported during the same period last year.
Net US crude imports increased by 299,000 bpd, while exports declined by 562,000 bpd to a total of 3.81 million bpd.
Currencies
The dollar has had a negative performance in August due to heightened concerns about Fed independence. The dollar index is -1.87% MTD and -9.45% YTD. The GBP is +2.21% MTD and +7.87% YTD against the USD. The EUR is +1.92% MTD against the USD and +12.45% YTD.
The US dollar increased modestly on Wednesday against the euro and the yen, retracing much of its earlier gains as investor attention shifted to upcoming economic data. This occurred amid lingering concerns about the Fed's independence.
The euro temporarily reached its weakest level since 6th August before closing down -0.07% at $1.1636. Sterling edged up +0.18% to $1.3495, while the dollar was relatively flat against the Japanese yen, rising a marginal +0.03% to ¥147.38, however, the US dollar is -2.20% against the yen MTD.
The dollar index fluctuated between gains and losses throughout the US trading afternoon, ultimately closing down -0.04% at 98.14.
Traders were largely in a holding pattern, awaiting key events such as Nvidia's earnings report and Friday's release of the Core Personal Consumption Expenditures (PCE) price index.
Preliminary data released Wednesday showed British producer output price inflation rose to a two-year high of 1.9% in June, up from 1.3% in May. This data, which trails a consumer inflation report showing a July increase in the British CPI to an 18-month high of 3.8%, adds to signs of inflationary pressures in the UK economy. Money markets are currently pricing in a 40% chance of a BoE rate cut by the end of the year.
The balance of risks for sterling against the euro appears to be tilted to the upside, as the hawkish repricing of BoE rate expectations continues to provide decent short-term momentum for the pound.
Cryptocurrencies
Bitcoin -4.29% MTD and +18.93% YTD to $111,534.72.
Ethereum +21.26% MTD and +35.20% YTD to $4,523.91.
Bitcoin was +0.31% Wednesday and Ethereum was -1.07%. There has been a heavy rotation out of Bitcoin into Ethereum in August. This may be attributed to the passing of the GENIUS Act in the US. This act provides a regulatory framework for stablecoins which has led to greater demand for these coins and more of these stablecoins are expected to be issued. The majority of stablecoins are built on the Ethereum chain. In addition, August has seen a rapid inflow by institutional investors into Ethereum ETFs. US Spot Ethereum saw $307 million in net inflows on Wednesday alone, continuing to outpace the net inflows reported by Spot Bitcoin ETFs.
However, despite concerns that Bitcoin may continue to face continued weakness in the near term, it is scarce with a finite supply of 21 million Bitcoins. As noted by Yahoo finance, longer-term forecasts remain bullish with Standard Chartered reiterating this week its end-2025 price target of $200,000–$250,000, while Bernstein analysts see $200,000 by early 2026, citing stronger-than-expected ETF inflows that mark “a new institutional era” for digital assets. Analysts point to accelerating inflows into US Spot Bitcoin ETFs, pension funds now being able to allocate some of their holdings to Bitcoin, and a tightening supply following this year’s halving event as key tailwinds.
Note: As of 5:30 pm EDT 27 August 2025
Fixed Income
US 10-year yield -13.6 bps MTD and -33.7 bps YTD to 4.239%.
German 10-year yield +0.6 bps MTD and +33.3 bps YTD to 2.702%.
UK 10-year yield +16.6 bps MTD and +17.1 bps YTD to 4.739%.
On Wednesday, interest rate-sensitive two-year yields dropped to an almost four-month low, and the yield curve steepened. This shift occurred as traders began pricing in a higher probability of further Fed rate cuts, fuelled by the prospect of the US President appointing more dovish officials to the central bank.
Fed Governor Lisa Cook's lawyer announced Tuesday that she will file a lawsuit to prevent the President from removing her from her position. This action initiates what could be a prolonged legal battle over the White House's influence on US monetary policy. Traders are anticipating that Fed policy could be tilted toward greater monetary easing if the President is successful in making additional appointments to the Fed.
Despite these political developments, the future trajectory of interest rates beyond the FOMC September meeting remains uncertain. The decision will likely depend on the strength of the labour market and evolving inflation trends. In a Wednesday interview on CNBC, New York Fed President John Williams said while interest rates may eventually decline, policymakers will need to assess upcoming economic data to determine if a rate cut is appropriate at next month's meeting.
The two-year note yield settled at 3.621%, down -6.2 bps for the day. The 10-year note yield fell by -2.0 bps to 4.239%, its lowest level since 14th August. The yield curve, measured by the spread between two-year and 30-year notes, steepened to 130.2 bps, its steepest since August 2021.
A politically influenced Fed that holds interest rates lower than market conditions would otherwise warrant could heighten inflation concerns and diminish foreign investor confidence, thus weighing on longer-dated debt and further steepening the yield curve.
The Treasury Department has conducted two of three auctions this week, selling a total of $183 billion in short- and intermediate-dated notes. On Wednesday, a $70-billion sale of five-year notes saw average demand, with a high yield of 3.724% and a bid-to-cover ratio of 2.36x. This followed strong demand for a $69-billion sale of two-year notes on Tuesday. A $44-billion sale of seven-year notes is scheduled for Thursday.
The yield on the US 10-year Treasury note is -13.6 bps MTD. The US 30-year yield is +2.4 bps MTD. At the short end, the two-year Treasury yield is -34.2 bps MTD.
Markets will now be looking to Friday’s release of the Personal Consumption Expenditure Price Index for additional support to a definitive Fed cut in September.
The current sentiment in the Fed funds futures market according to CME's FedWatch Tool, suggests that the Fed will implement a 25 bps cut on 17th September, with a 88.7% probability of doing so, higher than the 61.9% probability assigned a month ago. Markets are pricing in 57.0 bps of cuts by year-end, compared to 54.4 bps the week prior, and 44.7 bps a month ago.
Across the Atlantic, political unrest has caused France's 30-year bond yield to reach its highest point since 2011. This week, the potential collapse of France's minority government, possibly through a no-confidence vote, has led to a notable selloff in French stocks and bonds.
The French 30-year yield increased by +4.7 bps to 4.442%, marking its highest level since November 2011. Similarly, the French 10-year yield rose by +1.4 bps to 3.515%, reaching its highest point in five months.
In contrast, Germany's 10-year bond yield fell -2.8 bps to 2.702%. The yield on the 30-year German bond was -1.1 bps at 3.309%. The German 2-year yield, which correlates to ECB monetary policy expectations, ended the session -3.2 bps to 1.916%.
The spread between the French and German 10-year yields, an indicator of the risk premium for French debt, expanded to 81.3 bps, its widest since April, and increasing by 15.8 bps since July 31st. This spread had previously reached 90.0 bps last year, a level not seen since the 2012 eurozone crisis. Notably, the spread between French and Italian bonds narrowed to 6.3 bps, down from 15.6 basis points on July 31st.
The current political instability in France is contributing to broader concerns in global bond markets regarding increasing deficits and the independence of the Fed. Should Prime Minister Francois Bayrou's administration fall, President Emmanuel Macron may either appoint a new premier or call for new legislative elections, though neither action is expected to resolve France's budgetary challenges.
Italy's 10-year yield was up +1.8 bps on Wednesday, reaching 3.578%.
The German 10-year yield is +0.6 bps MTD in August. The spread between US 10-year Treasuries and German Bunds has narrowed 13.3 bps from 167.0 bps on 30 July to 153.7 bps now.
Throughout, the 2-year Schatz -5.5 bps to 1.916%, and on the long end of the maturity spectrum, the German 30-year yield is +12.9 bps MTD to 3.309%.
The Italian 10 year bond yield, a eurozone periphery benchmark, is +7.1 bps MTD to 3.578%. This increased the spread over its Bunds equivalent to 87.6 bps, 6.5 bps lower than the 81.1. bps recorded on 31st July.
France’s 10-year OAT yield is +16.4 bps MTD to 3.515%. The spread of French government bonds versus German Bunds is 81.3 bps, a 15.8 bps increase from 65.5 bps on July 31st.
In the UK, the 10 year gilt yield -0.6bps to 4.739% on Wednesday. It is bps +16.6 MTD. However, the UK 30 year is +22.7 bps MTD to 5.604%.
Note: Data as of 5:00 pm EDT 27 August 2025
What to think about in September 2025
Thoughts on the White House's orchestrated challenges to the Fed's independence. According to Bloomberg news, the Trump administration is exploring options to exert greater influence over the Fed's 12 regional banks, potentially expanding its reach beyond Washington personnel appointments. This effort is linked to the administration’s attempt to remove Governor Lisa Cook, a move that could grant the administration control of the Federal Reserve Board and enable them to pursue aggressive interest rate cuts. To achieve this, the administration would need to find a way to pressure or replace the heads of the regional Fed banks.
The full FOMC determines interest rates. This committee comprises the seven-member Board of Governors in Washington, the President of the Fed of New York, and four of the remaining eleven Reserve Bank presidents who serve on a rotating basis. Therefore, even if a new Fed Chair were appointed to support interest rate cuts, other FOMC members could easily outvote them. This structural constraint has largely led investors to remain calm about the prospect of a new Fed Chair, assuming they would be constrained by the majority of mainstream economists on the committee.
However, investors may be underestimating the White House's determination to influence the Fed. If Governor Cook is successfully removed, the administration could gain control of the Federal Reserve Board and use its powers to reshape the regional Feds. While regional Feds chiefs are selected by local boards, the seven-member Board of Governors in Washington must approve their appointments. All twelve regional presidents are due for re-approval this February, a process that has historically been a formality. There has never been a case of the Fed Board vetoing a regional president selected by a local board, but the process may become more political.
While the administration cannot dictate who the local boards nominate, it could impede the re-appointment of existing presidents. The Federal Reserve Act of 1913 stipulates that Class B and C directors form a search committee for candidates. Class A directors, who are representatives of local banks, are prohibited from this process to safeguard independence. Nevertheless, it is unlikely that regional directors would nominate a candidate who would be disapproved by the Board in Washington.
Furthermore, the Federal Reserve Board in DC appoints Class C directors. In many districts, Class B directors may be susceptible to pressure from the administration to nominate candidates who align with the president's objectives. This provides the White House with potential avenues to pursue its goals. As former New York Fed Governor Bill Dudley highlighted in a Bloomberg Opinion column: ‘Whatever the outcome, the potential for standoffs, showdowns, chaos and uncertainty would be truly frightening.’
Signs of increasing political influence are already evident. Governors Christopher Waller and Michelle Bowman, both Trump appointees, abstained from voting for Austan Goolsbee's nomination for the Chicago Fed presidency, the first such instance in history.
Fed Governor Lisa Cook's lawyer confirmed Tuesday that she will contest the firing in court, while a Fed spokesperson reaffirmed the central bank's independence and stated it would follow judicial rulings.
Federal law stipulates that a president can only remove a Fed governor ‘for cause.’ While the Supreme Court's ruling in Trump v. Wilcox in May upheld certain executive firings, it also emphasised the unique structure of the Fed. The courts, however, have not directly addressed the 'for cause' provision in the context of a Fed official's removal. Some commentators, as reported by Politico, speculate that the Supreme Court may be hesitant to intervene in this matter.
Despite the legal proceedings, the White House is reportedly moving forward with plans for a replacement. There are suggestions that President Trump may nominate Council of Economic Advisers Chair Miran to fill Cook's seat, which has a term extending until 2038. Additionally, former World Bank President David Malpass is being considered for the vacant seat previously held by Adriana Kugler. Senate confirmation hearings for these nominations could begin as early as next week.
Key events in September 2025
The potential policy and geopolitical risks for investors that could affect corporate earnings, stock market performance, currency valuations, sovereign and corporate bond markets and cryptocurrencies include:
31 August - 1 September Shanghai Cooperation Organization (SCO) Summit, Tianjin, China. This will be the 25th Heads of State Council meeting. China, as the rotating president of SCO, is putting together more than 100 events in political, security, economic, and people-to-people fields under the theme of "Upholding the Shanghai Spirit: SCO on the Move." Discussions are expected to focus on efforts to combat terrorism and extremism and promoting trade and investment among member states.
9-23 September UN General Assembly, New York. The event will bring global leaders, civil society stakeholders, policymakers and others.
10-11 September European Central Bank Monetary Policy Meeting. The ECB is expected to hold rates at this meeting as inflation has come in at target levels. ECB President Christine Lagarde has praised the resilience of the eurozone labour market but said it is difficult to say with confidence whether the patterns of recent years will persist. Meanwhile, Bundesbank President Joachim Nagel has said that there’s a “high bar” for further action following eight cuts to date.
16-17 September Federal Reserve Monetary Policy Meeting. Following on from Fed Chair Jerome Powell’s speech at Jackson Hole, the FOMC is widely expected to cut rates by 25 bps at this meeting. However, markets will also be looking to see what happens next regarding President Trump’s attempts to reconfigure the FOMC and the impact this may have on the trajectory of monetary policy.
18 September Bank of England Monetary Policy Meeting. With the August cut of 25 bps being so close that it required two rounds of voting and with inflation coming in above target, the BoE is unlikely to cut rates again at this meeting. Derivatives markets are pricing in just one quarter-point rate cut by the BoE over the next 12 months. In addition, given rising yields at the longer end, the BoE may come under some pressure to slow down its quantitative tightening (QT) programme to shrink its balance sheet as this is putting strain on bond prices.
18-19 September Bank of Japan Monetary Policy Meeting. Although the BoJ is expected to implement another 25 bps rate rise this year, it is generally not expected until at least October.
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