European and UK Equity Capital Markets Review August 2026

• August was marked by renewed volatility around Iran and the Strait of Hormuz. The US–Iran negotiation window expired without agreement, before discussions over an Iran–Oman shipping corridor briefly raised hopes of improved energy flows. However, US and Iranian strikes resumed at month-end, ending a month-long pause in direct military action. Equity markets nevertheless remained resilient, supported by healthy corporate earnings with most indices close to all time highs. UK equities closed mixed, with the FTSE 250 gaining 4.0% and reaching an all-time high of 24,939 on 28 August, while the FTSE 100 declined 0.4%. The STOXX 600 advanced 0.3%, having reached a record high of 661 on 11 August. US equities also ended higher, with the S&P Equal Weight gaining 1.9%, the S&P 500 rising 2.6% and the Nasdaq advancing 3.9%; the S&P 500 reached multiple all-time highs, including 7,799 on 13 August. AI remained a key driver of market performance, although returns across mega-cap technology stocks were fragmented as investors became increasingly selective around capex and earnings delivery.
  
  
• Oil prices were volatile throughout August, moving within a wide range as markets reacted to developments around Iran and the Strait of Hormuz. Brent fell from c.$90/bbl to an intramonth low of c.$79/bbl as diplomatic optimism improved, before rising to c.$94/bbl following the expiry of the US–Iran negotiation window. Prices subsequently retreated towards $88/bbl as the proposed Iran–Oman shipping corridor raised hopes of improved supply, before recovering as hostilities resumed. Continued restrictions through the Strait maintained a geopolitical risk premium, while the prospect of prolonged disruption reinforced inflation concerns, pushed bond yields higher and increased the risk of delayed monetary-policy easing.
  
  
• Central-bank policy remained focused on the risk of persistent inflation. New Fed Chair Kevin Warsh adopted a distinctly hawkish tone at Jackson Hole, reiterating the Fed’s commitment to its 2% target and signalling that rates may need to rise unless inflation moderates more convincingly. Markets consequently increased the probability of a September Fed hike, pushing short-dated Treasury yields and the US dollar higher. The ECB also maintained a relatively hawkish stance as energy prices lifted eurozone inflation, with markets increasingly expecting further tightening. By contrast, softer UK labour-market and activity data left the BoE comparatively more dovish, with a higher threshold for renewed tightening. The Bank is expected to look through temporary energy-price volatility unless it feeds more persistently into wages, underlying inflation and corporate pricing behaviour.
  
  
• AI remained a key driver of equity-market performance and capital-markets activity, whilst strong earnings helped US software stocks rebound from earlier disruption concerns (Nasdaq gained 3.9% in August). NVIDIA reported Q2 revenue of $96.2bn, up 106% YoY, driven by a 117% increase in Data Centre revenue to $89.0bn. Its $108bn Q3 guidance reinforced confidence in global AI demand, supporting a 10% share-price gain during August. Investor appetite also translated into sizeable transactions, with Alibaba completing an HK$80bn placement to fund AI infrastructure.
  
  
• SpaceX shares performed strongly through post-IPO lock-up expiries on 6 and 20 August, despite concerns that 911.5m newly tradable shares from the first tranche would create a significant supply overhang. The stock rallied following the first expiry and recovered quickly from modest weakness around the second, suggesting that the additional supply was absorbed relatively well. SpaceX closed August at $143.7, 6.4% above its $135 IPO price and up 32.6% over the month, although still well below its post-IPO peak. The resilience through both expiries highlighted continued investor appetite for scaled AI-related growth platforms, although the discount to its post-IPO peak indicated greater valuation discipline. Investor appetite for AI remained strong, with reports suggesting that Anthropic could raise more than $60bn at a valuation of c.$2tn. This would make it the second-largest IPO by proceeds, but potentially the largest listing on record by market capitalisation at IPO, ahead of SpaceX.
  
  
• In Europe, ECM issuance reached $110.5bn YTD by the end of August, extremely close to the 10-year YTD average and well ahead of 2025, despite monthly volumes slowing to a year-low $3.8bn amid the seasonal summer lull. In the UK, deal count fell to 8 from 14 in August 2025, although proceeds increased by 74%, driven by 2 sizeable and well-supported transactions: Tritax Big Box’s $471m growth capital raise and a $230m secondary placement in Coca-Cola HBC. The former deal is significant for the UK market because it provides investors with scarce listed exposure to AI infrastructure, while demonstrating how established property businesses are repositioning and pivoting to capture AI-led growth. Meanwhile, strong demand for the Coca-Cola HBC placement underscored continued investor appetite for high-quality, liquid UK-listed companies.
  
  
• UK public M&A activity remains elevated, with £67.1bn of transactions above £200m announced over the last 12 months at an average premium of 38.2%. In August, Pinewood.AI agreed a £545m cash offer from Ridgeview Partners at a 43% premium, providing capital and strategic support to accelerate its international expansion and investment in AI-enabled automotive software. Prologis agreed to acquire SEGRO for c.£14bn at a 39% premium, combining complementary logistics portfolios and providing greater financial capacity to develop SEGRO’s data-centre pipeline. These transactions underscore the attractiveness of UK valuations and continued strategic and financial-buyer appetite. While UK ECM has recovered more slowly, improving sentiment and a healthy pipeline suggest volumes will pick up, particularly as M&A activity returns cash proceeds to shareholders. Investec is seeing increasing interest from investors for new ideas as these proceeds are recycled.
   

• Equity markets entered 2026 strongly before renewed conflict in the Middle East triggered a sharp sell-off in March and early April. Markets subsequently recovered through May and June and remained resilient in August, despite renewed volatility around Iran and the Strait of Hormuz, supported by strong corporate earnings.
• A robust US earnings season reinforced confidence in the economic and AI investment outlook, helping the S&P 500 reach multiple all-time highs during August. Average S&P 500 Q2 beat was 26%, with the index expected to post four consecutive quarters of 20%+ earnings growth. Positive sentiment extended across regions, with the FTSE 250 and STOXX 600 also surpassing their previous peaks, although persistent inflation and interest-rate uncertainty remain key risks.
• Market leadership continued to rotate and broaden during August. Energy and Basic Resources remained Europe’s strongest sectors YTD, supported by higher oil prices and recovering commodities, while Technology strengthened as positive software earnings eased concerns over AI-led disruption. In the UK, improving domestic sentiment helped the FTSE 250 move ahead of the FTSE 100, as leadership shifted away from oil majors, miners and banks, while stronger sterling weighed on the translated overseas earnings of internationally exposed companies.
• In August, the FTSE 250 rose 4.0%, taking its YTD gain to 11.0%, while the FTSE 100 declined 0.4% during the month but remained 9.0% higher YTD. Elsewhere, the STOXX 600 advanced 0.3% in August and 9.9% YTD, while the S&P 500 and Nasdaq gained 2.6% and 3.9% during the month, taking their respective YTD returns to 12.3% and 13.5%.
   

• The headline valuation gap between the UK and US remains substantial, although the FTSE All-Share’s discount to the S&P 500 has narrowed from 39% in January to 35% in July and remained at that level in August. This reflects some expansion in UK multiples alongside compression in the S&P 500 multiple as strong earnings growth caught up with share-price performance.
• UK equities remain attractively valued relative to global peers, as also evidenced by continued M&A interest in UK-listed companies. While the FTSE 100 P/E has moved towards the upper end of its five-year range as stronger forecasts for oil majors and miners were priced in, the FTSE 250 continues to trade below its longer-term average.
• On a growth-adjusted basis, the headline S&P 500 screens more attractively than most other indices, as outsized earnings growth among a small group of large technology companies reduces its PEG ratio. This is less evident in the Equal Weighted Index, highlighting the concentration of earnings growth, while the FTSE 250 also remains attractively valued relative to its growth outlook.
   

• Government bond yields remained volatile through August, initially falling as hopes of progress with Iran pushed oil prices lower before reversing as renewed tensions revived inflation concerns. The moves underscored the sensitivity of rate expectations to energy prices and the risk that central banks may need to remain tighter for longer with most long dated yields hitting multi-year highs.
• UK inflation rose to 2.9% in July from 2.6%, driven by the higher Ofgem energy price cap, while core CPI remained at 2.6%. With underlying price and wage pressures contained, the BoE is likely to look through the energy-led increase for now.
• Eurozone flash inflation rose to 3.3% in August from 2.9%, driven by energy, while core and services inflation eased to 2.4% and 3.0%, respectively. US headline and core CPI both fell 0.1ppts to 3.4% and 2.5% in July, reducing pressure for an immediate rate hike. However, Chair Warsh struck a hawkish tone at Jackson Hole, prompting markets to increase tightening expectations.
   

• Whilst growth optimism strengthened in the August BAML survey, with a net 35% of European investors expecting regional growth to accelerate and 97% ruling out a recession over the next 12 months, the highest since 2007, policy caution rose sharply, with 65% expecting a higher-for-longer regime, up from 23% in July.
• Whilst higher-for-longer expectations signal continued policy caution, the latest BAML survey shows that investor risk appetite remains strong, with a net 56% overweight global equities, the highest since November 2021, and allocations remaining overweight for 14 consecutive months.
• The August BAML survey ranks Spain as Europe’s preferred market, supported by strong economic growth, followed by Germany as fiscal stimulus improves its recovery outlook. Easing political uncertainty lifted the UK to a modest overweight, while weak growth, fiscal pressures and political fragmentation pushed France to a record-low net 56% underweight.
   

IPO issuance in Europe

• European IPO activity paused in August, with no transactions priced following the $1.7bn raised across 24 IPOs in July, reflecting the seasonal summer slowdown.
• In 2025, there were 48 IPOs priced above US$50m, raising US$17.7bn in aggregate for the full-year, with an average issue size of US$363m (versus 47 IPOs in 2024, which raised US$17.9bn, with an average issue size of US$381m). In 2026 YTD, there have been 44 IPOs above US$50m so far, raising US$11.3bn in aggregate, with an average issue size of US$257m.
• Aftermarket performance of European IPOs has been varied with some notable underperformers but also some that have performed strongly such that the average is firmly positive.
• Elevated volatility in 2026 has seen shorter execution windows to allow issuers to mitigate market risk and also led some European IPO processes to be delayed.
• There is still a gap to close in terms of European IPO activity to reach 10-year averages, but the medium-term pipeline is healthier than it has been in prior years with a number of flagship assets preparing and monitoring market conditions / execution windows.