The FTSE 100 Index underperformed many of its major global counterparts during August. The blue-chip index’s performance was dampened partly by weakness in commodity-related and banking sectors, and by its low exposure to technology- and AI-related companies.
- The ten-year gilt yield hit an 18-year high
- Consumer and business confidence improved
- The FTSE 250 Index posted a new record
Mid-caps lead blue-chips: the FTSE 100 Index underperformed many of its major global counterparts during August. The blue-chip index’s performance was dampened partly by weakness in commodity-related and banking sectors, and by its low exposure to technology- and AI-related companies, while rising bond yields reduced the appeal of some of the major dividend payers . During August, the FTSE 100 Index fell by 0.4%. In contrast, the more domestically focused FTSE 250 Index hit a new high during the month, benefiting from its lack of exposure to the mining sector, and renewed interest in UK medium-sized companies. The mid-cap index rose by 4% over August.
“Concerns over inflation and borrowing drove the ten-year gilt yield as high as 5.15%”
Economic growth loses momentum: having expanded by 0.6% in the first quarter of 2026, UK economic growth slowed to 0.4% in the second quarter, dampened by higher energy costs caused by the Middle East conflict. Job vacancies fell between May and July. Although average wages (excluding bonuses) rose by 3.5% year on year during the period, earnings growth in the private sector fell to 2.8%, reaching its lowest level since 2020.
Inflationary pressures: intensifying concerns over inflation and borrowing drove the ten-year gilt yield as high as 5.15% during August, rising to levels last seen in 2008. The annualised rate of consumer price inflation rose to 2.9% in July to reach its highest rate since March, stoked by rising gas prices. Elsewhere, Ofgem announced a 4% increase in the energy price cap from 1 October, citing higher gas prices; the increase is expected to add to inflationary pressures.
Green shoots? Consumer confidence continued to improve, according to GfK, achieving its strongest showing since August 2024. Meanwhile, Lloyds’ Business Barometer reported that UK business confidence improved in August to reach its highest level since March amid optimism that the economy is coping better than expected with the impact of geopolitical tensions and higher energy prices.
Double-digit growth for UK AUM: during August, the Investment Association reported that the UK investment management industry had reached a new peak of £11.1 trillion assets under management in 2025, registering a second straight year of double-digit growth.
A risk to stability? In his role as Chair of the Financial Stability Board, Bank of England Governor Andrew Bailey warned G20 finance ministers and central bank governors that AI posed a significant risk to global economic stability and to the security of financial systems.
To view the series of market updates through August, click here
