Cooling Inflation, Patient Fed: Global Markets Diverge

For the week of Aug 14, a lighter data calendar and a fresh batch of cooling inflation prints set a constructive tone for global equities, even as regional performance sharply diverged. In the U.S., softer July CPI and PPI readings eased fears of renewed price pressure and trimmed bets on a September Fed hike, helping the S&P 500 grind to fresh record highs. China and Hong Kong slipped, dragged by internet heavyweights and a tax-driven sell-off in insurers despite pockets of strength in optical and property names. Singapore bucked the regional softness, with the Straits Times Index nudging to a new high on gains in shipbuilders and industrials.

(Refer to the major indices' weekly performance tables below.)

🇺🇸 United States

Market Overview

U.S. equities finished mixed as cooling inflation and easing Fed-hike expectations were offset by softer consumer data and rising oil prices. The S&P 500 (SPX) added 0.36% to a fresh record while the Nasdaq Composite (COMP) was little changed at +0.14%, and the Dow Jones Industrial Average (DJI) lagged, slipping 0.56%. Small- and mid-caps outperformed, with the Russell 2000 and S&P MidCap 400 each gaining over 1%.

Index Weekly Performance

– Dow Jones Industrial Average (DJI): -0.56%

– S&P 500 (SPX): +0.36%

– Nasdaq Composite (COMP): +0.14%

Key Highlights and Outlook

1️⃣ July Inflation Resumes Its Downward Trend

Headline CPI rose 0.1% in July and 3.4% year over year, down from June's 3.5%, while core CPI eased to 2.5% from 2.6% — both in line with estimates. Cooler-than-expected producer prices followed, with headline PPI slowing to 4.7% from 5.5%, reinforcing the disinflation narrative and easing fears that price pressures were broadening.

2️⃣ September Rate-Hike Odds Fade

The softer prints pushed futures-implied odds of a September Fed hike to roughly 32% by Friday, down from about 52% earlier in the week, per CME FedWatch. With the next meeting not until mid-September, patience — favoured by nine of twelve voters in July — looks likely to prevail again.

3️⃣ Consumer Data Disappoints

Retail sales fell 0.6% in July, the sharpest monthly drop since May 2025, while the University of Michigan's preliminary August sentiment reading slid 4.2 points to 51. The soft data tempered risk appetite but also eased near-term pressure on the Fed to tighten.

4️⃣ Treasury Yields Diverge

Shorter-term yields fell as hike bets receded, while long-end yields stayed elevated on heavy supply and fiscal concerns. The 10-year note auction cleared at its highest yield since 2007 and the 30-year at its highest since 2001, underscoring persistent term-premium pressure.

5️⃣ Earnings and Momentum Still Supportive

Edward Jones notes 2026 S&P 500 earnings-growth estimates now exceed 30%, with broad-based upward revisions and every sector expected to post positive growth. Coupled with Atlanta Fed GDPNow tracking Q3 near 4%, the fundamental backdrop remains a source of strength for equities.

6️⃣ Volatility Near 2026 Lows

The CBOE Volatility Index revisited its 2026 lows during the quieter week, reflecting calmer positioning even amid Middle East diplomacy headlines. Edward Jones favours diversification with an opportunistic lean toward equities rather than betting on any single inflation outcome.

S&P 500 Sectors in Focus

Sector breadth was broadly positive, led decisively by Energy as firmer oil prices lifted the group well clear of the pack. Defensive and rate-sensitive corners — Utilities, Communication Services, Consumer Staples and Technology — also advanced, while Financials, Industrials and Real Estate posted modest gains. Materials slipped and Consumer Discretionary was the clear laggard, weighed by the week's softer consumer data.

(Refer to the SPX sector ETF weekly performance table below.)

Technical Snapshot

The SPX printed fresh all-time highs, extending its uptrend as breadth improved into small- and mid-caps. The Nasdaq held near previous record territory but stalled, while the DJI slipped and underperformed the broader tape. All three indexes remain in constructive uptrends near their highs.

📊 Weekly charts:

– DJI weekly chart

– SPX weekly chart

– Nasdaq weekly chart

 

🇨🇳 China / Hong Kong

Market Overview

China equities were choppy and ended lower, with Hong Kong underperforming. The Shanghai Composite (SSE) edged down 0.33% and the CSI 300 fell 0.61% in local-currency terms, as early strength in consumer and property names faded on losses in precious-metals stocks. Hong Kong's Hang Seng Index (HSI) dropped 2.15%, weighed by internet heavyweights and mixed corporate earnings.

(Refer to the major indices' weekly performance tables above.)

Index Weekly Performance

– CSI 300: -0.61%

– Shanghai Composite (SSE): -0.33%

– Hang Seng Index (HSI): -2.15%

Key Highlights and Outlook

1️⃣ China Inflation Cools to Multi-Month Lows

CPI rose just 0.5% year over year in July, a six-month low and down from 1% in June, as the oil-price shock from the U.S.–Iran war faded and food prices softened; core CPI eased to 0.9%. PPI growth slowed to 3.5% from 4.1%, its first moderation since producer inflation turned positive earlier this year.

2️⃣ Insurers Sell Off on Offshore Tax Crackdown

Stricter enforcement of taxes on offshore insurance income triggered a sell-off in Hong Kong financials, hitting insurers hardest. Maybank KE calls the reaction overdone, staying positive on AIA — viewed as oversold — and constructive on China Life on prospects for capital rotating back onshore.

3️⃣ Tencent Kicks Off a Mixed Earnings Season

Tencent opened China's reporting season with solid growth across gaming, advertising and cloud, though sentiment was tempered by rising capex. With results now flowing, earnings are likely to set fresh direction; Maybank KE also flags MiniMax as attractive on potential index-inclusion catalysts.

4️⃣ Beijing Eases Homebuying Curbs

Authorities relaxed purchase rules for nonresidents within the Fifth Ring Road, cutting the required contribution period to one year from two and lifting provident-fund loan limits. The measures echo earlier Shanghai easing and lifted property developers, offering modest support to sentiment.

5️⃣ Hang Seng Tech Index Set to Expand

Hang Seng Indexes plans to grow the tech gauge from 30 to 50 constituents, adding AI and robotics names and selecting ten by sales growth rather than market cap. Final revisions are targeted for end-September, with implementation at the December 2026 rebalancing.

Technical Snapshot

The HSI broke lower, sliding 2.15% to close near 25,117 as internet leaders led declines. Momentum has cooled after recent strength, with the index now testing support after failing to hold higher levels. A sustained recovery hinges on stabilisation in tech heavyweights and clearer signals from the earnings season.

(Refer to the Hang Seng Index constituents' weekly performance table below.)

📊 Weekly charts:

– SSE weekly chart

– HSI weekly chart

 

🇸🇬 Singapore

Market Overview

The Straits Times Index (STI) outperformed the region, rising 0.79% to a fresh high near 5,744 as gains in shipbuilders, industrials and OCBC outweighed weakness in aviation and offshore names. Breadth was mixed, with sharp single-stock moves in both directions across the blue chips.

(Refer to the major indices' weekly performance tables above.)

Index Weekly Performance

– Straits Times Index (STI): +0.79%

Key Highlights and Outlook

1️⃣ Shipbuilders and Industrials Lead

Yangzijiang Shipbuilding jumped 10.0% and Hongkong Land added 8.8%, while ST Engineering rose 6.2% and Genting Singapore gained 7.3%. The index's advance was powered by cyclical and industrial names even as several REITs and offshore counters lagged.

2️⃣ OCBC Powers the Banks' Divergence

OCBC surged 4.9% and now leads the local banks at +60.9% year to date, while DBS and UOB slipped 1.1% and 3.5% respectively. The split left the STI's heavyweight banking trio mixed, with OCBC doing the heavy lifting this week.

3️⃣ Aviation and Offshore Under Pressure

Singapore Airlines was the weakest blue chip, falling 7.2%, with UOL down 5.4% and Wilmar off 4.8%. Rising oil prices and profit-taking weighed on transport, property and agri-commodity names after their recent strength.

4️⃣ STI Extends Its Record Run

The 0.79% gain lifted the STI to a new closing high and a 23.6% year-to-date advance, cementing its status as a regional outperformer. Resilient index heavyweights and steady domestic sentiment continue to underpin the benchmark.

Technical Snapshot

The STI pushed to a fresh record near 5,744, extending its multi-month uptrend on broad blue-chip support. Momentum stays constructive despite pockets of single-stock weakness, keeping the trend firmly higher. A close above current levels would reinforce the breakout, with pullbacks likely viewed as buying opportunities.

(Refer to the STI Index constituents' weekly performance table below.)

📊 Weekly charts:

– STI weekly chart

 

📅 Week Ahead (17–21 August 2026)

In the U.S., attention turns to the minutes of the July FOMC meeting for detail on how divided policymakers were over the inflation outlook, alongside flash S&P Global PMIs and housing data. With the next rate decision set for mid-September, any hawkish nuance could quickly reprice September expectations.

In China and Hong Kong, the earnings season accelerates, with a heavy slate of internet, insurance and property results likely to drive index direction. Loan prime rate fixings and further property-easing signals from major cities also remain in focus after Beijing's latest measures.

In Singapore and the region, the STI's record run faces a test from regional macro data and the tail of local earnings, with trade figures and currency moves in view. Bank-sector momentum after OCBC's outperformance will be watched closely.

🗓️ Overarching Watchpoint — The July FOMC minutes are the week's key binary: confirmation of a patient, data-dependent stance would sustain the disinflation-driven rally, while any hawkish surprise could unwind it — with the Jackson Hole symposium (Aug 27–29) looming as the larger catalyst just beyond.

 

Source: Some content and data are excerpted from publicly available market reports.