25 Aug 2026 — Daily Market Update

US equities ended mixed on Monday as Washington escalated its economic pressure on Iran and AI hardware stocks continued to weaken ahead of Nvidia’s earnings. At the same time, Treasury Secretary Scott Bessent’s plan to expand US Treasury buybacks using the Treasury General Account helped push long-term yields and oil prices lower.

S&P 500: -0.28% to 7,652.86

Dow Jones: +0.26% to 53,417.16

Nasdaq: -0.76% to 25,980.19

US 2Y Treasury yield: +0.4bp to 4.238%

US 10Y Treasury yield: -3.8bp to 4.70%

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1. US Expands Economic Pressure on Iran

The US Treasury announced a broader round of sanctions aimed at further isolating Iran economically.

* The measures target close to 60 individuals, companies, vessels and related networks.

* Sanctions cover areas including oil transportation, shipping, gold, aviation, technology and digital assets.

* Washington is also widening the scope for potential secondary sanctions against companies that continue doing business with Iran.

* Firms dealing with sanctioned Iranian entities could eventually face restrictions from the US dollar financial system.

* China remains Iran’s most important oil buyer, making any future US action against major Chinese counterparties an important risk to watch.

* Iran warned that if the US escalates into a full-scale “economic war”, it could retaliate by restricting oil exports through the Persian Gulf and Strait of Hormuz.

* Despite the stronger rhetoric, oil prices fell, suggesting markets currently see sanctions as an alternative to immediate military escalation rather than a signal of imminent conflict.

Market impact: A broader secondary-sanctions regime could push oil and inflation expectations higher, weighing on global risk assets.

Positive counterpoint: If economic pressure replaces military escalation and eventually brings both sides back to negotiations, geopolitical and oil-price risk premiums could fall further.

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2. Bessent May Use Nearly $1 Trillion of TGA Cash for Treasury Buybacks

US Treasury Secretary Scott Bessent signalled that the Treasury could use cash held in the Treasury General Account, or TGA, to support an expanded bond-buyback programme.

* The TGA currently holds roughly $940 billion in cash.

* Treasury has already announced larger buybacks of longer-dated government bonds starting in September.

* Some buyback operations for 10-year-plus maturities will increase from around $2 billion to at least $4 billion.

* Using TGA cash could reduce the need to issue additional short-term bills solely to fund buybacks.

* The objective is mainly to improve Treasury-market liquidity and debt-management efficiency rather than conduct traditional quantitative easing.

* The announcement supported long-duration Treasuries, with the 10-year yield falling to around 4.70%.

* However, large US fiscal deficits, heavy bond supply and persistent inflation remain structural pressures on long-term yields.

Market impact: Larger Treasury buybacks could temporarily reduce term premiums and support rate-sensitive assets such as growth stocks and real estate.

Positive counterpoint: The Treasury is clearly signalling that it does not want long-end yields to rise disorderly. If buybacks coincide with softer inflation, yields could move meaningfully lower.

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3. China Tech Capex Remains Strong: Alibaba, PDD and Xiaomi

China’s technology sector continues to increase spending on AI, cloud infrastructure and in-house semiconductor development.

* Alibaba is raising roughly HK$80 billion through a share placement.

* The proceeds will mainly fund AI chips, data centres, models and cloud infrastructure.

* The placement represents around 3.6% of enlarged share capital and came at a discount, putting short-term pressure on Alibaba shares.

* Investor demand was still strong, with the offering reportedly several times subscribed.

* Alibaba’s AI-related capital expenditure has continued to grow rapidly, while cloud and AI-related revenues are also expanding strongly.

* PDD reported Q2 revenue of RMB112.36 billion, while adjusted earnings per ADS came in ahead of expectations.

* Xiaomi also unveiled new internally developed chips and is expanding its semiconductor efforts into smartphones, AI computing and autonomous driving.

Market impact: Heavy AI investment could pressure near-term free cash flow and margins, while raising concerns that Chinese CSPs may eventually face the same capex-efficiency questions as US hyperscalers.

Positive counterpoint: Strong AI-related cloud growth and broader adoption of in-house chips suggest China’s AI capex cycle could still be at an early stage if monetisation continues to improve.

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4. This Week’s Key Test: Warsh, Nvidia and Core PCE

The market is entering a major event week where both interest-rate expectations and AI earnings could be repriced.

* Investors are closely watching Fed Chair Kevin Warsh’s Jackson Hole remarks for clues on the policy outlook.

* Markets want clarity on how the Fed views sticky inflation, rising long-term yields and the possibility of further rate hikes.

* Treasury efforts to suppress long-end yields could also create tension with the Fed’s inflation-control mandate.

* Nvidia will report earnings after Wednesday’s close.

* Key focus areas include AI GPU demand, Rubin orders, hyperscaler capex and forward guidance.

* Nvidia has now fallen for seven consecutive sessions, while other AI hardware names such as Micron and Broadcom have also weakened.

* July core PCE inflation will be released on the same day, creating a potentially powerful combination of earnings and macro risk.

Market impact: A hotter-than-expected PCE print combined with weak Nvidia guidance could trigger both earnings downgrades and valuation compression across technology stocks.

Positive counterpoint: AI hardware stocks have already undergone a meaningful pullback. If Nvidia confirms strong demand and PCE remains contained, the sector could see a sharp relief rally.

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What to Watch Today

Markets will continue to assess the impact of the latest US sanctions on Iran, as well as any response from Iran and its major trading partners.

Treasury investors will also watch whether long-term yields continue to decline following the expanded buyback discussion.

The most important events this week remain:

* Wednesday: Nvidia earnings + July Core PCE

* Friday: Kevin Warsh’s Jackson Hole speech

Upcoming US tech earnings also include Intuit, Zoom and Box, while Nvidia remains the key market-moving report for the week.

Bottom line:

The market is currently caught between two opposing forces: geopolitical and inflation risks on one side, and falling long-term yields plus continued AI investment on the other. This week’s Nvidia earnings and core PCE data are likely to determine whether the recent AI correction stabilises or extends further.