The University of Michigan’s consumer sentiment index fell to 51 in early August 2026, down from 55.2 in July and below market expectations of 54.5, ending two consecutive months of improvement. Both major components weakened, with the current conditions index declining to 51.8 and the expectations measure falling to 50.6. The deterioration was broad-based across political and demographic groups, with particularly sharp declines among older, lower-income and less-educated consumers, who are more exposed to rising prices. Expectations for business conditions also worsened significantly, falling 11% over the next year and 17% over the longer term. Inflation concerns increased slightly, with year-ahead expectations rising to 4.3% from 4.2%, while the long-term outlook remained unchanged at 3.3%. Only 8% of consumers now expect their incomes to grow faster than inflation, down from 18% in December 2024.

US stock indices closed lower on Friday as macroeconomic headwinds weighed. The S&P 500 eased 0.2% from its record high, while the Dow shed 108 points and the Nasdaq 100 fell 0.1%. The University of Michigan’s preliminary August sentiment index fell to 51, below forecasts of 55. Meanwhile, retail sales dropped in July by the most in over a year. The data, alongside weak jobs figures and soft inflation, suggested that the economy is showing signs of cooling. A slowdown in consumer spending could weigh on corporate profits and the stock market. Hyperscalers, including Meta (-0.9%), Oracle (-3.7%) and Amazon (-0.9%), posted losses. Heavyweight chipmakers closed mixed, with Broadcom down 5.9%, Intel losing 2%, and Nvidia edging lower, while AMD (+6.5%) and memory producers extended their strong gains from earlier in the week. Micron added 2.3% on bullish recommendations from analysts and brokers, while SanDisk jumped 7.4% following its 14% surge on Thursday.

The ongoing standstill between Iran and the US should continue to dictate energy prices and influence global interest rates, after the US prolonged its economic pressure on Iran instead of signaling efforts of diplomacy. Rates will also take the spotlight with minutes from a divisive meeting from the Federal Reserve, which included three dissents. The ECB will also post meeting accounts. Data from the US will be headlined by flash S&P PMIs, building permits, trade terms, and industrial production. PMIs will also be published for the Eurozone, Japan, Australia, India, and the UK. Meanwhile, both the UK and Canada will release inflation and retail sales. The Eurozone and Germany will release ZEW Economic Sentiment indices. Japan will release its Q2 GDP, trade balance, and inflation rate. In the meantime, China will publish industrial production, retail sales, housing prices, and join Australia, the UK, and Canada in unveiling unemployment figures. Sveriges Riksbank will set rates.

The yield on the 10-Year US Treasury note swung upward to the 4.7% mark on Friday, not far from the 19-month high of 4.75% tested earlier in the week on renewed aversion to bonds on the long end of the curve. Year-ahead inflation expectations compiled by the University of Michigan rose in August, a fifth month above the 4% level. This was aligned with lingering concerns that the Federal Reserve may be complacent to inflationary risks in the US economy, recently exacerbated by the surge in energy prices due to the war in the Middle East. Signals from Fed Chair Warsh that a rate hike may not be his preferred instrument against inflation drove long-dated yields to surge, with the 30-year bond rising to a 19-year high. Treasuries were also pressured by concerns that Japan could sell some of their ample reserves should the Ministry of Finance defend against a weak yen again. Treasuries undercame selling pressure despite softer-than-expected producer prices and weak retail sales data.

Wheat prices climbed more than 3% to around $6.70 a bushel on Friday, reaching a three-week high and bringing weekly gains to over 5%, the strongest performance since mid-July. The rally followed reports of a Ukrainian strike on a Russian Baltic port and Moscow’s rejection of a proposed Black Sea truce, reviving concerns over grain export disruptions. Ukraine’s military said it targeted a gas condensate processing facility at Ust-Luga, raising fresh worries about the security of Russia’s export infrastructure despite no reported damage to grain facilities. Earlier in the week, Ukrainian authorities had reportedly proposed halting attacks on civilian targets in the Black Sea, but Russia rejected the idea of a ceasefire. The risks are significant for global wheat supplies, as Russia and Ukraine are expected to account for nearly 30% of world wheat exports in the 2026/27 season.

Crude rose above $82 a barrel on Friday, extending gains to more than 5% this week as the US increased economic pressure on Iran to reopen the Strait of Hormuz. Treasury Secretary Scott Bessent said Washington would impose unprecedented economic measures while maintaining its naval blockade of Iranian ports, with further announcements expected next week. The International Energy Agency also warned of a deeper global supply deficit, forecasting the widest shortfall in 2026 in five years. Meanwhile, Iran and Oman have yet to reach an agreement on reopening Hormuz, despite earlier optimism that a deal was close. US officials said American forces are increasing their ability to escort vessels through the strait, although shipping remains risky, with some tankers switching off transponders. In the Red Sea, Iran-backed Houthi militants also targeted Saudi Arabia’s Jazan refinery. Meanwhile, additional Middle Eastern crude is expected to reach the US, offering some relief to low inventories.