Global stocks were on track for their best month since late 2020, recovering from a wild first half of 2022, as reduced rate hike expectations and upbeat earnings from big tech groups they drove a broad rebound.
The FTSE All-World index of developed and emerging market shares rose more than 6 percent in July, with sentiment boosted this week by resilient quarterly updates from US tech titans that indicated the tech sector mainstream US equities could withstand an economic slowdown.
The good performance in July contrasts with the first six months of this year, when the global stock index fell about 20 percent, dragged down by the worst first-half performance of US stock markets of $44 billion over 50 years.
“The tech earnings season has been a little better than the market feared,” said Baylee Wakefield, multi-asset fund manager at Aviva Investors.
“Investors are also betting heavily on the downside [economic] news that the Federal Reserve may become less aggressive in tightening monetary policy has been valued, and there is enthusiasm in equity markets for slower inflation and fewer rate hikes.”
Amazon shares had risen 12 percent in midday trading in New York on Friday, leaving them up 29 percent in July, after the e-commerce group beat analysts’ quarterly revenue forecasts and offered an outlook optimistic for the rest of the year due to strength. in your cloud computing business.
Alphabet parent Microsoft, Apple and Google also issued a more confident outlook than investors expected, boosting the U.S. technology sector that is disproportionately weighted in global markets.
In a sign of how investor sentiment is improving, US equity funds tracked by EPFR posted their biggest inflows in six weeks this week, picking up $9.5 billion of net new investment, according to Bank of America.
The top-tier S&P 500 is up more than 8 percent this month, with 86 percent of stocks listed in the index rising since the end of June, according to FactSet data. Across the Atlantic, Europe’s Stoxx 600 gained 8 percent.
The Fed, the world’s most influential central bank, raised interest rates sharply in the first seven months of this year. On Thursday, however, data showed the U.S. economy contracted for a second straight quarter, raising hopes that the worst inflationary cycle in four decades would moderate and that the Fed could slow its tightening politics.
“Investors have been more concerned about inflation and what that does to interest rates than anything else,” said Rebecca Chesworth, senior equity strategist at State Street’s SPDR ETF business.
“So they’ve taken any signal that inflation is going to come down and become bullish.”
Futures prices on Friday implied that the Fed’s main funds rate would peak at 3.29 percent next February from a range of 2.25 to 2.5 percent currently. By mid-June, these predictions were as high as 3.9%.
But strategists at Barclays warned that July’s strong performance in stocks and bonds “could come back down to earth” for inflation to remain high as a result of Russia’s invasion of Ukraine.
“The fundamental outlook remains clouded by the dramatic slowdown in the economy and high energy prices,” they said in a note to clients. “It feels optimistic to believe that the Fed can soon reverse course.”