Stocks on course for best month since November 2020

Global stocks headed for their best month since late 2020 as robust results from big tech companies signalled the sector’s resilience to an economic slowdown and traders scaled back expectations of central bank rate rises.

The FTSE All World index of developed and emerging market shares jumped 5.8 per cent in July, leaving it on track for its best month since November 2020. The rise reflects significant gains for the $44tn US equities market.

Shares in Amazon leapt 14 per cent higher in after-hours trading in New York after the ecommerce giant beat analysts’ quarterly revenue forecasts and offered an upbeat outlook for the rest of the year because of strength in its cloud computing business.

This capped a week of well received financial updates from Microsoft, Apple and Google parent Alphabet, who all issued more confident outlooks than investors had feared, lifting the tech sector that dominates US indices and has an outsized weighting in global markets.

Wall Street equity futures rallied on Friday, with contracts on the tech-heavy Nasdaq 100 rising 1.5 per cent and those on the broader S&P 500 adding 0.8 per cent. The S&P 500 was up 7.6 per cent for July by the close of trading on Thursday. Europe’s Stoxx 600 was also set to post a big monthly rise, climbing 7 per cent since the end of June.

Data on Thursday showed the US economy had contracted for a second consecutive quarter sparking a rally in government bonds as markets anticipated that the Federal Reserve was less likely to continue with aggressive rate rises to tackle surging inflation.

The Fed this week raised its main funds rate by 0.75 percentage points for the second month in a row, taking it into a range of 2.25 to 2.5 per cent.

“Economic data has not been that strong [and] that was taken as less aggressive monetary policy going forward,” said Antoine Lesne, head of strategy and research at State Street’s SPDR ETF business.

“The Fed is going to continue to hike,” he added, “but not as forcefully as the market had previously expected.”

The yield on the benchmark 10-year Treasury bond, a barometer for borrowing costs worldwide, fell 0.01 percentage points on Friday to 2.7 per cent as the price of the debt rose. This key debt yield traded at around 2.8 per cent at the start of July and about 3.5 per cent in mid-June.

The two-year Treasury yield, which reflects interest rate expectations and dropped sharply on Thursday, declined by a further 0.04 percentage points to 2.83 per cent.

The dollar index, which tracks the US currency against six others, fell 0.7 per cent.