A sharp rally in US and European shares over recent days has landed hedge funds betting on a decline in stock markets on either side of the pond with an estimated $43bn of losses, according to a report by the Financial Times.

The report cites calculations by data group S3 Partners as estimating that funds suffered $43.2bn of losses on short bets in the US and Europe from Tuesday to Friday last week. S3 Partners' data does not take account of gains that funds may have made in other stocks they own.

The report quotes Emmanuel Cau, Head of European Equity Strategy at Barclays, as saying that short sellers who had had built up bets against companies exposed to higher borrowing costs over the past year or so, have been caught out by a “painful” rebound in “low quality” stocks this month.

The market has also strengthened on increased confidence that the US Federal Researcve has fondly reached the end of its programme of interest rate hikes.

The rally has left Wall Street’s S&P 500 index on track for its strongest month since July last year.