Rising incomes are scary, but not much.

The week began with the Labor Day holiday in the US, a quiet Monday. However, on Tuesday, stock markets fell sharply, pressured by the sharp rise in long-term sovereign debt yields, which fueled concerns about fiscal sustainability in the largest developed economies.

In the United Kingdom, 30-year gilts reached their highest levels since 1998, reflecting investor concerns about rising public debt and persistent budget deficits. In France, yields on 30-year bonds also soared, reaching their highest level since 2009, amid political unrest and uncertainty surrounding the survival of François Bayrou's minority government, which faces a vote of no confidence after announcing budget cuts for 2026. The combination of these factors increased government financing costs and triggered a wave of risk aversion. Investors sold stocks and migrated to assets considered safer, such as gold, which reached new highs, and the dollar, which re-appreciated against major currencies. Market nervousness was also fueled by the perception that rising yields could curb private investment, hurting economic growth prospects. The environment of fiscal and political uncertainty reinforced selling pressure in equity markets, leading the STOXX 600 to record its biggest drop in a month.

On Wednesday, Alphabet (Google) shares rose more than 9% after a U.S. federal judge ruled that the company would not have to sell its Chrome browser or Android operating system, although it would have to review exclusivity contracts with manufacturers and developers. The ruling eliminated the risk of a forced spinoff and guaranteed Google continued payments to strategic partners, including Apple. As a result, Apple's shares rose about 3.8%, as it secured the continuity of one of its most lucrative revenue streams from Google. The impact of this decision extended to the entire technology sector, boosting the S&P 500 and the Nasdaq.

On Thursday, stock markets continued their recovery, supported primarily by two dynamics. On the one hand, weaker US labor market data and statements from several Federal Reserve officials reinforced bets on a September interest rate cut, which increased risk appetite.

Private sector payrolls grew less than expected in August, and weekly unemployment benefit claims exceeded estimates, signs of a cooling employment situation that increased the probability (95%) of a 25 basis point cut, according to the CME's FedWatch tool. On the other hand, bond markets felt a sense of relief, with falling German and French bond yields helping to calm the jitters generated earlier in the week by fiscal fears. This combination helped calm investor concerns and propel equity markets to near all-time highs.

The main stock indexes are now focused on the employment report for this Friday, September 5th.