Global Markets React to Iran Sanctions Threat and Hawkish Fed Signals
21 August 2026 · Morning
US Treasury Secretary Bessent announced 'toughest sanctions ever' against Iran, escalating geopolitical tensions and pushing WTI crude oil up 2.89% to $86.83 per barrel.
Despite Treasury's expanded bond buyback plans, US 10-year Treasury yields climbed 6.7 basis points to 4.708%, fueled by robust Philadelphia Fed manufacturing data and hawkish Fed remarks.
Major US indices, including the S&P 500 (-0.87%) and Nasdaq (-1.00%), declined as rising rates combined with disappointing Walmart sales figures.
The confluence of geopolitical risk, inflation concerns from oil, and persistent hawkish signals from the Federal Reserve continues to weigh on market sentiment.
Global bond yields are climbing, a trend that is blunting the Federal Reserve's policy signals and impacting currency markets worldwide.
Global Markets
Detail
S&P 500
Closed at 7,641.16 on 8/20
-0.87%
Nasdaq
Closed at 26,067.16 on 8/20
-1.00%
STOXX 600
Closed at 650.36 on 8/20
-0.12%
Nikkei 225
Closed at 66,216.57 on 8/20
+1.36%
CSI 300
Closed at 4,592.75 on 8/20
+0.09%
KOSPI
Closed at 6,852.58 on 8/20
+5.89%
Hang Seng
Closed at 25,698.49 on 8/20
+0.80%
Dollar Index (DXY)
Closed at 98.88 on 8/20
+0.11%
Dollar/Yen
Traded at 159.05 on 8/21
+0.01%
Euro/Dollar
Traded at 1.17 on 8/21
-0.01%
Dollar/Won
Traded at 1,394.05 on 8/20
+0.47%
Dollar/Yuan
Traded at 6.72 on 8/20
-0.10%
US 10-year
Closed at 4.708% on 8/20
+6.7bp
US 2-year
Closed at 4.190% on 8/20
+2.8bp
Japan 10-year
Closed at 2.863% on 8/20
-3.4bp
Germany 10-year
Closed at 3.255% on 8/20
-0.3bp
Korea 10-year
Closed at 4.334% on 8/20
-7.9bp
US HY Spread
Closed at 273bp on 8/19
-2.0bp
WTI
Closed at $86.83 per barrel on 8/20
+2.89%
Gold
Closed at 4,518.45 on 8/20
-0.08%
Copper
Closed at 6.47 on 8/20
-0.42%
VIX
Closed at 16.02 on 8/20
+7.66%
Global Yields Rise, Blunting Fed's Signal
Rising long-term yields are a global phenomenon, according to Federal Reserve officials.
Yields Up
Deepening Global Dollar Weakness
The U.S. Dollar Index is trading near a three-month low, primarily due to the erosion of its long-term yield advantage.
USD Weakens
IMF Warns AI May Not Curb Inflation
The IMF's new Chief Economist, Tenreyro, challenged the notion that higher productivity from AI will automatically lead to lower inflation.
Inflation Risk
Global Stocks Fall Amid Policy Doubts
Global equity markets continued to decline as investors questioned the sustainability of the Treasury's efforts to support bond liquidity.
Stocks Down
United States
US long-term yields continue to rise, dollar mixedYields Up
Rising oil prices due to Iran sanction concerns, strong economic indicators, and inflation expectations pressured long-term bond yields.
US 10-year Treasury yields settled near 4.70% despite liquidity support from the Treasury.
The dollar initially weakened due to fiscal concerns but rebounded, while gold and Bitcoin saw declines.
US pursues 'toughest sanctions ever' on Iran and naval blockadeIran Sanctions
Treasury Secretary Bessent stated the goal is regime collapse through a 'double measure of naval blockade and the strongest sanctions in history'.
Details are expected to be unveiled at a press conference on Monday.
The US urged cooperation from major trading partners like China; Iran's foreign ministry condemned the sanctions as 'economic terrorism'.
Hezbollah was re-designated as an organization under Iran's IRGC-Quds Force, subjecting it to additional sanctions.
US Treasury again considers increasing bond buyback sizeBuybacks Up
Secretary Bessent hinted at potentially increasing buyback sizes beyond $4 billion per issue, following Wednesday's announcement of a twofold increase.
Despite Treasury's support, long-term bond yields continued to climb, indicating persistent inflation and debt concerns.
Federal Reserve officials reiterated their commitment to monetary policy independence, focusing on inflation and employment.
Fed does not rule out September rate hike amid strong dataRate Hike Risk
The Philadelphia Fed's August business outlook index surged to 47.4, significantly exceeding the 25.0 forecast, with the 6-month leading indicator at 73.6.
Minutes from the July FOMC meeting showed three members favored a rate hike, indicating a hawkish tilt within the committee.
Fed Governor Daly noted that the Fed is 'missing its inflation goal by quite a bit,' justifying potential further rate increases.
US government debt exceeds $40 trillion for the first time$40T Debt
This record was reached amid structural spending pressures from an aging population, climate change, and increased defense spending.
Inflation risks, reignited by the Iran conflict, are accelerating borrowing costs.
Government debt and borrowing costs are nearing their highest levels in a decade compared to G7 counterparts.
Walmart (WMT)-9.15%
Q2 adjusted EPS of $0.81 beat consensus of $0.74, and revenue of $187.9 billion surpassed estimates.
However, US comparable sales (excluding fuel) grew only 2.6%, significantly missing the 3.8% consensus and marking the lowest growth in six years.
The company's full-year revenue guidance and Q3 guidance both fell below market expectations, contributing to a pre-market stock drop of 5-8%.
Q2 results included a 75bp one-time tariff refund benefit, while the Health & Wellness segment was negatively impacted by 900bp due to the Inflation Reduction Act's drug pricing policies.
Micron Technology (MU)+3.97%
Micron announced plans to invest over $25 billion in the US over the next decade, creating more than 90,000 jobs.
A key part of this investment is a new 'Micron Research Lab' in Boise, Idaho, where $10 billion will be dedicated over 10 years to AI memory, computing systems, and future chip manufacturing.
This initiative aims to strengthen Micron's competitiveness in the rapidly expanding AI infrastructure market, which is driving demand for memory chips.
Broadcom (AVGO)+0.43%
Broadcom is reportedly negotiating with lenders to raise over $6 billion in debt to fund AI chip initiatives, including for AI developer Anthropic.
The financing structure includes $3 billion in junior debt and $6-7 billion in senior secured debt, with some guaranteed by Broadcom.
Total funds raised could reach up to $10 billion, indicating significant investment in the AI sector.
Abbott (ABT)-0.25%
Abbott reached a $670 million settlement for lawsuits related to its specialty infant formula for premature babies, resolving claims from approximately 2,000 victims.
This settlement includes the Gill case, where a St. Louis jury in 2024 found Abbott's formula caused necrotizing enterocolitis (NEC) in an Illinois infant.
However, about 1,700 related lawsuits involving 12,700 infant claims are still pending, meaning legal risks are not fully resolved.
Merck (MRK)-2.11%
Merck and Moderna's co-developed personalized mRNA melanoma vaccine showed significant efficacy in late-stage clinical trials, boosting confidence in its oncology pipeline.
Several firms adjusted their outlooks: BMO, Morgan Stanley, and Jefferies raised their target prices.
RBC downgraded its rating but still raised its target price, reflecting mixed views on the stock's immediate performance despite positive trial results.
Marvell Technology (MRVL)+5.79%
Marvell is expected to generate approximately $12 billion in additional revenue from its custom chip development partnership with Google.
This collaboration has led to speculation about Marvell's potential to reach a $1 trillion market capitalization.
UBS analysts raised their target price, reflecting the positive impact of this news.
Nvidia (NVDA)-0.33%
Nvidia plans to ship small quantities of AI chips designed for Chinese customers by the end of the year, with orders already placed.
These chips are a variant of Nvidia's Language Processing Unit (LPU), licensed from Groq, and are intended to accelerate AI chatbot responses when paired with Nvidia's GPUs.
While designed to comply with US export regulations, final approval from the Chinese government remains uncertain.
Palo Alto Networks (PANW)-2.84%
Palo Alto Networks formed a global strategic alliance with NTT DATA, aiming for $1 billion in joint business revenue by 2029.
The partnership focuses on accelerating Secure AI Transformation for clients.
BMO Capital raised its target price for Palo Alto Networks.
AMD (AMD)
AMD strengthened its corporate governance by appointing Tim Ryan to its board of directors.
KC McClure was also named Chair of the Audit and Finance Committee.
Eli Lilly (LLY)
Eli Lilly entered into a co-development agreement with Amplitude Therapeutics for mRNA vaccines targeting infectious diseases.
The deal grants Eli Lilly exclusive commercialization rights and options for additional targets.
Amazon (AMZN)-2.16%
Prime Video plans to invest over $2 billion in five Latin American countries between 2027-2030, aiming to double its local original content.
Amazon's drone delivery service is set to expand to 500 US locations by year-end.
Rosenblatt Securities initiated coverage with a Buy rating.
Meta Platforms (META)-0.04%
Meta has emerged as a key AI client for Microsoft, according to reports.
In a child safety lawsuit filed by 29 states, a former engineer testified about the CEO's alleged negligence regarding safety policies, raising questions about executive responsibility.
Alphabet (GOOGL)-1.17%
Google launched Antigravity, a new management feature for Gemini Enterprise app subscriptions, including administrative and expense management.
Alphabet is also a buyer in Marvell's $12 billion AI chip contract.
Rosenblatt Securities initiated coverage with a Buy rating.
SpaceX (xAI)
xAI launched Grok 4.6 on Amazon Bedrock.
Reports indicate xAI attempted to acquire AI coding startup Cognition.
Boeing (BA)-3.20%
The US State Department approved a $4.5 billion sale of KC-46A aerial refueling aircraft to Qatar, with Boeing as the prime contractor.
JPMorgan (JPM)
Indian securities regulators suspended a local affiliate's trading activities due to alleged manipulation of closing prices.
Berkshire Hathaway (BRK.A)
An appeals court upheld a major settlement related to real estate commission collusion involving one of Berkshire Hathaway's home services affiliates.
ExxonMobil (XOM)+0.84%
The fifth floating production storage and offloading (FPSO) vessel, Errea Wittu, for the Stabroek Block in Guyana, led by an ExxonMobil consortium, has arrived offshore.
Built by Japan's MODEC, this facility will be deployed for the Uaru project, capable of processing 250,000 barrels of oil per day, with MODEC operating and maintaining it for 10 years.
NextEra Energy (NEE)
The Governor of Maine publicly opposed NextEra Energy's proposed acquisition of Dominion Energy, citing concerns about restricted competition and potential rate increases.
GE Vernova (GEV)-2.17%
Exane BNP Paribas Securities lowered its target price for GE Vernova.
India
India allows duty-free imports of sugarSugar Imports
The emergency measure was taken after sugar prices surged 40% in two months, reaching record levels.
India, the world's largest sugar consumer, is resuming imports for the first time in a decade.
The move aims to ease the burden on consumer households ahead of the festival season.
Investors dump India bonds after hawkish RBI minutesBonds Sold
Minutes from the Monetary Policy Committee signaled stronger rate hikes if inflation risks persist, driven by concerns over oil and food inflation.
The benchmark 10-year bond yield (6.94% 2036 maturity) rose 5 basis points to 6.8709%, its highest since mid-June.
The bond curve flattened as short-term yields rose and long-term yields fell.
Indian shares rebound, Rupee slightly strongerMarket Rebound
The Nifty 50 rose 0.64% to 24,231.85, and the BSE Sensex gained 0.82% to 77,537.72, snapping losing streaks of seven and four trading days respectively.
The rebound aligned with global stock market recovery and stabilization in the US Treasury market.
The Rupee strengthened slightly to 95.7050 per dollar from 95.7525, with volatility limited by central bank intervention.
India eases rules for rupee export payments, seeks to widen trade settlementRupee Trade
Trade policy regulations were amended to treat export contracts, invoices, and payments equally in both Rupees and foreign currencies.
Barriers were removed by allowing Rupee transactions with countries outside the Asian Clearing Union (ACU).
This initiative aims to expand the use of the Rupee in international trade.
India considers low-cost loans for renewable projects hit by power curbsGreen Loans
India's solar-centric renewable energy capacity stands at 162 GW, about one-third of total generation, but transmission infrastructure is inadequate.
Renewable energy operators have incurred losses due to supply restrictions caused by transmission constraints.
The government is reviewing policies to compensate for these losses through low-interest loans.
Latin America
Mexico's central bank signals prolonged pause in ratesRates On Hold
Minutes from the August monetary policy meeting explained the background and detailed positions behind the unanimous decision to maintain rates at 6.5%.
While inflation is easing, the pace of decline is slower than expected due to persistent service price increases; headline inflation was 3.10% in early July, but service prices remain high.
Upside risks to inflation are exacerbated by Middle East conflict, trade uncertainties, and a strengthening El Niño phenomenon.
GDP grew, but a negative output gap signals continued weakness in domestic demand.
Brazil to Maintain Fiscal Discipline Under LulaFiscal Restraint
Brazilian Treasury Secretary Dario Durigan pledged to maintain the fiscal framework and spending controls if President Lula is re-elected in October.
The current administration has implemented fiscal efforts equivalent to 2% of GDP and plans to continue similar measures.
This commitment aims to ensure fiscal stability through spending control and revenue recovery.
Latin America Growth Muted Through 2027Growth Slows
The UN Economic Commission for Latin America and the Caribbean (ECLAC) forecasts muted economic growth for the region through 2027.
GDP growth is projected at 2.2% for 2026 (down from 2.4% previously) and 2.5% for 2027.
This downward revision from December's 2.3% forecast for 2026 reflects worsening international conditions, marking five consecutive years of weak growth despite stable inflation.
Latin American currencies weakened by 0.3% against the U.S. dollar, while regional stocks saw mixed performance, with the MSCI LatAm stock index down 0.2%.
This occurred despite U.S. Treasury liquidity support measures, as U.S. long-term bond yields continued to climb.
Inflation concerns are clouding the region's economic outlook, though Mexico's central bank hinted at a pause in interest rate hikes after the economy grew 2.7% year-on-year in July.
Argentina Economic Activity ReboundsActivity +2.7% YoY
Argentina's economic activity increased by 2.7% year-on-year in June, rebounding from a 0.4% rise in the previous month.
This figure surpassed market expectations of 1.9%, driven primarily by strong performance in fishing and mining.
Twelve out of fifteen tracked sectors showed growth, indicating broad-based recovery.
Argentina Logs $2.12 Billion Trade SurplusTrade Surplus $2.12B
Argentina recorded a trade surplus of $2.12 billion in July, with exports totaling $8.85 billion and imports at $6.74 billion.
This surplus exceeded market expectations of $1.85 billion by $270 million.
The strong trade performance contributes positively to the country's external accounts.
Emerging Markets
Romania shoots down marine drone near Black Sea gas facilityDrone Down
Defense Minister Radu Miruta reported an F-16 fighter jet shot down a marine drone found hundreds of meters from the Neptun Deep gas project.
The Neptun Deep project is set to begin operations in 2027, potentially making Romania the EU's largest gas producer.
As a NATO member sharing a 614 km land border with Ukraine, Romania faces increasing drone and mine threats targeting Black Sea energy infrastructure.
Bangladesh parliament elects Alamgir as new presidentNew President
The parliament elected Mirza Fakhrul Islam Alamgir, a seasoned leader of the Bangladesh Nationalist Party (BNP), as president.
The BNP transitioned from opposition to ruling party after gaining power in recent political changes.
Poland Plans Corporate Tax Hike for Energy FirmsTax Hike
Poland's government plans to impose a 30% corporate tax on large utility and fuel companies with annual revenues over €50 million, starting in 2027.
The current corporate tax rate is 19%, with plans to gradually reduce it back to 19% by 2030.
The measure aims to fund support for the energy industry and strengthen national defense, requiring parliamentary and presidential approval.
Lebanon Parliament Passes Bank Restructuring LawLaw Passed
Lebanon's parliament passed amendments to the bank restructuring law, now awaiting presidential signature.
The High Financial Supervisory Commission's powers are expanded, allowing it to directly decide on bank restructuring or liquidation.
Discussions with the IMF on depositor bailout laws are ongoing, crucial for addressing the country's financial crisis.
Egypt Sees Record RemittancesRemittances +29.6%
Remittances from Egyptian workers abroad reached a record $47.3 billion in fiscal year 2025/26.
This marks a significant increase of 29.6% from $36.5 billion in the previous year.
The surge in remittances is a positive sign for improving foreign exchange liquidity in Egypt.
Russian forces launched a large-scale air assault on Kyiv yesterday evening, resulting in 16 deaths and over 40 injuries.
Civilian buildings, schools, and hospitals were hit, prompting President Zelenskyy to highlight a shortage of air defense missiles.
Internal political tensions in Ukraine are also rising, with a dismissed defense minister calling for wartime elections amid corruption and personnel disputes, and a Ukrainian drone entering Latvian airspace raising fears of wider conflict.
Monetary Policy Council (MPC) member Tyrowicz proposed a 1.0 percentage point interest rate hike at the July meeting.
Despite this, the benchmark interest rate was kept at 3.75% for the fourth consecutive month due to opposition from other members.
This indicates internal pressure within the MPC for tighter monetary policy to address inflation concerns.
North Korea Launches Over 10 Ballistic MissilesMissile Launch
North Korea launched over 10 ballistic missiles yesterday afternoon, coinciding with the final stages of joint U.S.-South Korea military drills.
South Korea's presidential office convened an emergency security meeting in response to the launches.
Japan's Ministry of Defense confirmed missiles fell outside its exclusive economic zone, a move that undermines attempts to restore diplomacy with North Korea.
Malaysia Probes Sovereign Wealth Fund UnitGovernance Probe
Prime Minister Anwar ordered a comprehensive investigation into alleged governance violations at Xeraya Capital, a biotechnology investment subsidiary of sovereign wealth fund Khazanah Nasional.
The probe includes past transactions and aims to address governance issues within the investment sector.
This signals a focus on transparency and accountability in state-linked entities.
Ethiopia Central Bank Allots $500 Million in FXFX Allotment $500M
Ethiopia's central bank allotted $500 million in a special foreign exchange auction.
This measure is aimed at managing foreign exchange liquidity within the country.
The allocation helps to stabilize the currency and support import needs.
Markets & Commodities
US 30-year Treasury yields resume risingYields Up
Despite the Treasury doubling bond buyback sizes, 30-year yields temporarily rose from 5.1765% to 5.225-5.2214%, indicating insufficient restoration of investor confidence.
Although yields retreated from their highest levels since 2007, questions about stability persist, with the market doubting the sustainability of policy interventions.
Fed's Daly: long-term...Fed Comment
Federal Reserve Governor Daly commented on long-term...
Canadian Dollar Hits Near 3-Month HighCAD +
The Canadian dollar traded near 1.3790/USD, its highest level since May 21.
The currency was supported by a combination of rising oil prices and a weaker U.S. dollar.
Positive prospects for trade negotiations with the United States also provided a boost to the loonie.
Canada July Producer Prices ReboundPPI +0.6% MoM
Canada's industrial product prices rose 0.6% month-over-month in July, recovering from a 1.4% decline in the previous month.
Energy and precious metals were the primary drivers of this rebound, though prices remained high at +12.4% year-over-year.
Raw materials prices, however, decreased 2.2% month-over-month but were still up 18.1% year-over-year.
Swiss Franc Strengthens Among G10 CurrenciesCHF Strong
The Swiss Franc was the best-performing G10 currency following an announcement from the Treasury.
This strength was attributed to the unwinding of short positions, as the CHF is often used as a low-interest funding currency.
Sustained risk appetite is crucial for the continued strength of high-yielding emerging market currencies, with concerns about position unwinding if risk sentiment weakens.
Europe
Italy's MPS Counter-Bids Intesa's OfferM&A Battle
Monte dei Paschi di Siena (MPS) approved a counter-bid strategy to acquire Banco BPM and Banca Generali.
This move aims to fend off Intesa Sanpaolo's (€36B) takeover proposal, which involved splitting MPS into two entities.
The Italian Prime Minister had previously criticized Intesa's original plan, signaling a period of restructuring in the Italian financial sector.
Eurozone Bond Yields StabilizeYields Stable
Eurozone government bond yields stabilized after the U.S. Treasury announced expanded liquidity support for its long-term bonds.
The U.S. Treasury's official goal is to calm rising long-term interest rates.
They plan to maintain current levels of coupon issuance and floating-rate note (FRN) issuance for several quarters.
British Pound Hits 6-Month HighGBP +
GBP/USD reached $1.3661 yesterday, its highest level since February 16.
The pound's strength was driven by the deepening weakness of the U.S. dollar following the U.S. Treasury's bond liquidity measures.
The UK statistics office also revised up its GDP estimates for 2023 and 2024, with 2024 now 0.5% higher, reflecting improved measurements in services and real estate rentals.
UK Economic Data Due TodayData Watch
Key economic indicators for the UK are expected today, including July retail sales and August preliminary PMI figures.
July retail sales are forecast to show a 0.5% month-over-month decline, while government net borrowing (PSNB) is expected at 0.
Preliminary August PMI figures are anticipated at 51.8 for services and 51.5 for manufacturing, indicating continued expansion.
UK Factory Orders Reach Highest in a Long TimeOrders Up
The Confederation of British Industry (CBI) factory order survey reported the highest performance for UK factory orders in a long time.
This indicates a positive trend in the manufacturing sector, reflecting increased demand and production.
The robust performance suggests resilience in the face of broader economic uncertainties.
Europe STOXX 600 Slips on Inflation FearsSTOXX 600 -0.12%
The European STOXX 600 index closed down 0.12% at 650.35 points yesterday.
Persistent inflation concerns, fueled by strong oil prices, weighed on investor sentiment.
German producer prices (PPI) recorded their highest increase in three years, adding to inflation worries, though U.S. Treasury liquidity measures limited further losses.
Switzerland, China Finalize Revised FTATrade Deal
Switzerland and China finalized an updated free trade agreement, significantly improving Swiss export access to the Chinese market.
Under the revised deal, 99.8% of Swiss exports will enter China duty-free, a substantial increase from the previous ~50%.
Swiss President Guy Parmelin and Chinese Commerce Minister Wang Wentao announced the conclusion of negotiations in Bern yesterday, enhancing market access compared to the 2014 FTA.
China
China's Rare Earth Exports to US RiseExports Up
China's customs agency reported an increase in exports of rare earth yttrium to the United States in July.
Yttrium is a critical material for the U.S. aerospace and defense industries, used in manufacturing aircraft, satellites, and electronic devices.
This increase signals an easing of supply chain constraints for the U.S. and highlights its deepening reliance on China, which controls over 60% of global rare earth supply.
China Urges South Korea to Avoid Choosing SidesDiplomacy
Chinese Foreign Minister Wang Yi urged South Korea to pursue 'strategic autonomy' and avoid taking sides between the U.S. and China.
During a meeting with South Korean diplomatic representatives yesterday, Wang also called for a shift in U.S. policy towards North Korea.
He identified the U.S.'s 'hostile policy' as the primary cause of tensions on the Korean Peninsula.