Global stock markets experienced a significant rise on Thursday as recent data indicated that the United States is not on the verge of a recession, coupled with another quarter of economic growth in Britain.

An increase in American retail sales and strong financial results from Walmart eased concerns about the world’s largest economy.

In London, the FTSE 100 saw an increase of 66.30 points, or 0.8%, reaching 8,347.35, its best performance in over a week. This came after the Office for National Statistics announced that the UK economy grew by 0.6% in the second quarter, following a 0.7% growth in the first quarter, largely driven by a strong performance in the services sector.

• Forget US jobs data — Tokyo’s rate rise triggered the global sell-off

This surge in share prices represents a sharp turnaround for markets on both sides of the Atlantic. Billions were wiped off stocks worldwide last week amid fears of a US economic downturn, exacerbated by Japan’s interest rate hike.

American retail sales rose by 1% in July from June, marking the largest increase since early 2023, as reported by the US Department of Commerce.

The report highlighted increases in sales of electronics, motor vehicles, home furnishings, and groceries, indicating that Americans remain resilient despite higher borrowing costs and an uncertain economic outlook.

“It now appears that overall consumption growth accelerated last month, and our estimate of third-quarter GDP growth is now close to 2% on an annualised basis,” said Capital Economics, a consultancy.

Another report showed that the number of Americans filing new claims for unemployment benefits fell to a one-month low last week.

US stocks rose and government bonds were sold off following the data releases. The S&P 500 closed 1.6% higher at 5,543.22, pulling it out of negative territory for the month as the benchmark index fully recovered from the early August sell-off. In the bond markets, the yield on the interest rate-sensitive two-year treasury note rose by as much as 0.17 percentage points to nearly 4.12%. Yields increase as prices fall.

This follows a surprising report on labor market deterioration earlier this month, which had raised fears of a recession and contributed to the global market sell-off.

Ronald Temple, chief market strategist at Lazard, said the latest sales and jobless claims figures “offer yet more evidence that recession risk remains low in the US, even as the economy slows from unsustainably high growth levels. The case for the Federal Reserve to ease [interest rates] by 25 basis points is compelling, but there is little evidence for a need for a 50-basis-point cut.”

Richard de Chazal, an analyst at William Blair, commented: “Once again, this is further evidence that the US consumer remains robust. This was another solid report, inconsistent with a consumer on the brink of collapse.”

Steve Wyett, chief investment strategist at BOK Financial, remarked: “The economy is not heading into a recession imminently.”

Walmart, the American retail giant, has increased its annual sales forecast as consumers continue to prioritize spending on low-cost essentials. Its US like-for-like sales rose by 4.2% to $115.3 billion in the three months to July 26, reflecting a higher growth rate than in the prior two quarters.

John David Rainey, Walmart’s CFO, noted that the company has not observed any signs of a sales slowdown since early August. “Things have been remarkably consistent,” he said, adding, “I know everyone is looking for some indication of further weakness, but we’re not seeing it with our members and customers.”

Markets are now pricing in fewer than four quarter-point interest rate cuts this year, down from just over four early in the week, implying a half-point cut since only three Federal Open Market Committee meetings remain before January.

“Yesterday, I was 50-50 on whether the Fed would cut [rates by] 25 basis points or 50 basis points [in September],” said Mike Zigmont, head of trading and research at Harvest Volatility Management. “Today, I’m 75-25 that they’ll only cut 25 basis points.”

This month, the Bank of England cut its interest rates for the first time in four years to 5%, with City traders expecting at least one more rate cut before year-end. Capital Economics analysts project the base rate to fall to 3% by the end of the next year. The UK economy has rebounded well after a brief recession at the end of 2023, with decreasing consumer price inflation boosting household spending and business confidence.