Microsoft Rally Lifts S&P 500 as Apple Outlook Disappoints

Summary

Microsoft's record surge helped lift the S&P 500 and Nasdaq after its upbeat AI-driven outlook, while Amazon also gained on strong results. Apple tempered the optimism by forecasting weaker-than-expected revenue growth due to chipmaking bottlenecks. Asian markets rebounded sharply, led by chipmakers in South Korea, as the Bank of Japan kept interest rates unchanged and the yen resumed weakening after a brief intervention-led recovery. European markets were also set for a stronger open.

Equities

The FTSE 100 closed 0.1% lower on Thursday at 10,897.27 after briefly reaching a fresh intraday record. The FTSE 250 finished 0.3% higher as investors reacted to the Bank of England's decision to leave interest rates unchanged. Sterling strengthened later in the session against a weaker US dollar, while mining shares benefited from firmer copper prices and steady gold prices.

Rolls-Royce closed 6% higher on Thursday after the engineering group raised its full-year guidance well above market expectations, making it one of the strongest performers in London. Mondi surged 10.9% following better-than-expected first-half results, marking its biggest one-day gain since August 2022. Rentokil Initial fell 20.6% after warning that trading in its North American business remained weaker than expected, while energy shares slipped despite Brent crude trading above $90 per barrel.

Wall Street rebounded strongly on Thursday after upbeat results and guidance from Microsoft restored confidence in large technology companies. The S&P 500 closed 1.66% higher at 7,437.63, the Nasdaq climbed 2.78% to 25,122.18 and the Dow Jones Industrial Average gained 1.19% to 52,208.06.

Microsoft jumped more than 15% on Thursday, adding around $450 billion to its market value in the largest single-day increase ever recorded by a US-listed company. The software group forecast stronger-than-expected quarterly revenue and cloud growth, while reporting lower capital expenditure than analysts had anticipated and saying it expects to continue generating cash throughout its 2027 financial year.

Chipmakers also posted substantial gains. Sandisk soared 26%, Micron Technology climbed 18% and Advanced Micro Devices advanced 13% as semiconductor shares recovered sharply. Amazon closed 3.9% higher ahead of its earnings announcement after the closing bell, while Apple slipped 1.4% before reporting results later the same day.

Meta Platforms fell after reporting a 91% decline in second-quarter free cash flow, highlighting the cost of its artificial intelligence investment programme. Qualcomm closed 2.6% lower after forecasting weaker-than-expected fourth-quarter profit and warning that revenue from Apple products would fall faster than previously expected. Fair Isaac dropped 17% despite raising its annual guidance, while Starbucks gained 1.6% after increasing its full-year sales and profit forecasts.

Forex & Commodities

The US dollar fell sharply on Thursday after the Federal Reserve left interest rates unchanged and markets questioned the outlook for future policy, while the Japanese yen surged to 158.3 against the dollar following what analysts believe was intervention by Japanese authorities ahead of the Bank of Japan's policy decision. The pound also strengthened against the dollar, with sterling rising above 1.3500, while the euro and Australian dollar gained ground against the weaker US currency. The Bank of Japan is expected to leave interest rates unchanged today while signalling that further increases remain possible.

Spot gold slipped early this morning to $4,077 per ounce as traders took profits following Thursday's rally, although the precious metal remains on course for its first monthly gain in five months after finding consistent buying interest around the $4,000 level. Investors are also monitoring the impact of the latest developments in the Middle East alongside expectations that there is now a 63% chance of a US interest rate increase in September following the Fed's latest meeting.

Oil prices fell early this morning, with Brent crude trading at $88.00 a barrel and US West Texas Intermediate at $82.09, although both benchmarks remain on track for monthly gains of around 20%. Increased tanker flows through the Strait of Hormuz have eased some supply concerns despite the continuing US-Iran conflict, while Saudi Arabia is leading a multinational maritime security initiative to protect key shipping routes.