Thursday 9 April 2020 11:54 am

Coronavirus: FTSE 100 and European stocks trim gains

The FTSE 100 trimmed gains along with the major European stocks after jumping on today’s open, but traders still hope the coronavirus pandemic is peaking.

Traders pushed London’s blue-chip index back into the green as it opened 1.9 per cent higher to 5,781 points.

Read more: Asian stocks climb as hopes grow coronavirus is peaking

The FTSE 100’s 100-point jump came after a 0.5 per cent drop into the red yesterday ended a two-day run of gains for UK stocks.

Economic data poor before coronavirus

Chris Beauchamp, chief analyst at online trader IG, said the FTSE 100 and European stocks pushed higher despite poor economic data.

Official figures released today revealed UK GDP grew at just 0.1 per cent before the coronavirus lockdown. That has reinforced predictions of huge contractions in the second quarter of 2020, economists said.

Read more: UK economy grew just 0.1 per cent before coronavirus lockdown

While that did not dent the FTSE 100’s early rise, the UK index succumbed to pressure by mid-morning. Gains on the FTSE trimmed to see it 0.9 per cent up at 5,729 points.

Traders were buoyed by the Bank of England temporarily agreeing to fund government borrowing during the coronavirus crisis.

The Bank’s move gives the government more of a freehand to raise cash quickly. The Treasury usually borrows money by issuing bonds to the market.

Read more: Bank of England to finance government borrowing during coronavirus crisis

European stocks match FTSE 100 jump

European indices walked back from earlier gains as traders lost their confidence by mid-morning.

Germany’s Dax stood 0.4 per cent up, compared to 1.5 per cent earlier. And France’s Cac sank to a 0.4 per cent drop from a 1.4 per cent rise. The pan-European Euro Stoxx 600 posted gains of just 0.2 per cent after adding 1.3 per cent.

“European stocks have already made solid, if unspectacular, gains this morning,” Beauchamp said.

“While these are not like the big moves higher of the past few weeks, the quieter mood is a more positive sign for the long term.”

It followed a rise in Wall Street stocks overnight. They surged over President Donald Trump’s optimism that the economy can recover quickly from the coronavirus fallout.

Read more: US stocks rise on hopes coronavirus is peaking

Beauchamp pointed out the optimism pushing up FTSE 100, European and US stocks is largely based on sentiment.

But he added: “It looks like this much-derided rally still has some way to go, frustrating those expecting further declines. Buyers should tread carefully however, since the economic outlook remains grim. [It is] hardly a conducive environment for equities in the medium-term.”

Coronavirus case fall behind FTSE 100 rally

Broadly speaking, European stocks and the FTSE 100 have risen this week on hopes authorities will relax coronavirus lockdown measures as cases fall.

Those hopes are still intact despite a recent rise in coronavirus deaths and EU finance ministers failing to agree an economic recovery strategy yesterday.

“Given the fast deteriorating economic tissue, there are talks in the US and Europe for start releasing some containment measures,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said.

But this would now run counter to an unexpected rise in new case numbers after a decline earlier this week, she added.

UK coronavirus deaths spiked overnight with 938 people dying. That followed a lower number on Monday, with Tuesday’s death rate rising again too.

Read more: UK coronavirus death toll jumps by 938 to pass 7,000

But the number of new hospitalisations dipped to rise by 10 per cent, according to Deutsche Bank. That is better than the previous five-day average of 14.4 per cent.

UK coronavirus cases could peak over Easter

Deutsche Bank’s Jim Reid said the coronavirus death rate could continue to climb but that does not correlate to a higher infection rate.

“We have now seen in many regions that fatalities do lag improvements elsewhere,” he said. “They can continue to rise when people who are hospitalised for long periods pass away even after case curves flatten.”

Read more: Trump extends US coronavirus measures beyond Easter

The government has warned that the UK coronavirus outbreak could peak over the Easter weekend, while the FTSE 100 is closed.

“The broad lockdown is taking a heavy toll on economies and lead to heated conversations among policymakers who seem increasingly impatient to see the economic activity getting back to a normal pace,” she warned.

“Alas, the time will show if releasing containment measures too early is the right decision, with the risk of prolonging the pandemic and its economic impact in time and in space.”