Tuesday 23 June 2020 4:57 pm

FTSE 100 and Wall Street gain on signs of economic recovery

The FTSE 100 closed up and Wall Street posted strong gains on Tuesday afternoon after new economic data signalled that business activity across the US, UK and the Eurozone was recovering faster than expected. 

Having risen steadily throughout the morning, the FTSE 100 pushed ahead in afternoon trading today as traders welcomed the most significant easing of England’s lockdown since it began in March.

The UK index closed 1.34 per cent up at 6,328 points. The rise was also fuelled by US President Donald Trump’s denial that phase one of the US-China trade deal negotiations were at risk.

Wall Street’s three major indices rose on Tuesday following upbeat data on the US manufacturing and services sectors.

FTSE 100 jumps as two-metre rule dropped  

The FTSE 100’s rise came as the Prime Minister cut the two-metre gap to “one metre-plus” from 4 July. Pubs, hairdressers and restaurants are set to reopen from that date.

Read more: Lockdown eased: Boris Johnson cuts two-metre rule to ‘one metre-plus’

Boris Johnson said: “Where it is possible to keep two metres apart people should. But where it is not we will advise people to keep a social distance of one metre-plus.

“This vital change enables the next stage of our plan to ease the lockdown.”

Johnson also outlined an expansion of social distancing restrictions to allow any two households of any size to meet “in any setting inside or out”.

The FTSE 250 followed the FTSE 100 up, but climbed at a slower pace, ending the session 0.49 per cent up.

Wall Street indices rise across the board 

Wall Street’s three major indexes rose on Tuesday as the pace of decline in business activity slowed, bolstering hopes that the worst of the coronavirus crisis was over.

The tech-heavy Nasdaq hit a fifth record high this month. The index was boosted by Apple after at least three brokerages boosted their targets for the tech giant’s stock a day after it announced it would use its own chips for Mac computers.

US equities were also bolstered by upbeat purchasing managers’ index (PMI) readings released on Tuesday, which showed that while private sector activity declined for a fifth straight month in June, the pace of decline slowed. 

The upbeat data on manufacturing and services sectors follows similar surveys from Europe earlier in the day as businesses reopened after the health crisis resulted in a lockdown in mid-March.

“Hopes of an economic rebound have helped lift market sentiment once again today, with traders disregarding ongoing fears over a potential second wave,” said IG senior market analyst Joshua Mahoney. 

“The resilient nature of markets over recent weeks serves to provide investors with greater confidence given the fears of a localised surge in US Covid cases,” he continued. 

“Trump’s claims that the rise in Covid cases is a simply a function of increased testing has some basis, and thus it makes sense to await a reversal in the current downward trajectory of deaths per capita to really start worrying,” Mahoney added. 

FTSE 100 reacts well to stronger PMIs

The FTSE 100 also responded to a positive set of PMIs predicting the UK economy will return to growth in the third quarter.

Britain’s manufacturing sector posted growth in June for the first time since lockdown began. And while the UK overall remained in decline, it performed far better than its lows across April and May.

The new data showed that the UK’s coronavirus-triggered economic downturn eased in June as some business activity resumed.

The IHS Markit/CIPS flash composite PMI jumped to 47.6 in June from 30.0 in May. Any reading below 50 indicates a contraction. 

The Eurozone posted similar economic mini-recoveries for June, as the Eurozone and UK posted four-month highs.

Read more: Eurozone PMI: Coronavirus downturn slows as lockdowns ease

“Both readings were substantially ahead of estimates,” Spreadex financial analyst Connor Campbell said.

“This, alongside the strong showing from the rest of Europe, and Trump’s anxiety-reducing US-China trade tweet from overnight, helped to push the FTSE 100 higher.”

European stocks surged ahead as France’s Cac added 1.85 per cent and Germany’s Dax leapt up 2.7 per cent.

“The market is viewing all good news in the best possible light, while negative news is being shrugged off and I see this kind of trend continuing for the time being,” said Chris Beauchamp, chief market analyst at IG.

FTSE 100 risers

Read more: Trump adviser walks back comments saying US-China trade deal is ‘over’

Investment firms M&G and Standard Life Aberdeen were among the FTSE 100’s biggest risers, adding 4.3 per cent and 6.31 per cent respectively.

Miner Evraz surged 8.19 per cent, while B&Q owner Kingfisher jumped 4.23 per cent as Johnson eased lockdown.

UK-exposed banks RBS and Lloyds also benefited as the PM sought to reopen the economy. RBS climbed 2.53 per cent higher, while Lloyds rose 3.48 per cent.

Trump calms US-China trade deal fears

Global markets also edged higher today after President Donald Trump said the US-China trade deal was “fully intact”.

Trump’s comments helped clarify earlier confusing statements from White House trade adviser Peter Navarro, who said the deal was “over”. Navarro had linked a breakdown in relations in part to Washington’s anger over Beijing not sounding the alarm earlier about the coronavirus outbreak.

The statement prompted a selloff across global markets overnight but equities quickly recovered after Navarro said his remarks had been taken out of context.

Read more: Trump adviser walks back comments saying US-China trade deal is ‘over’

US futures pointed higher, with the tech-heavy Nasdaq due to climb 1.1 per cent. The S&P 500 is set to inch 0.65 per cent up while the Dow Jones looked set to open 0.6 per cent up.

“With relations between Washington and Beijing seemingly in tatters, concerns are understandably growing around the hard-fought phase one trade deal,” forex trader Oanda’s Craig Erlam said. “When White House trade adviser Peter Navarro said the trade deal was over, it triggered a bit of panic in out of hours trading.

“Thankfully there’s a lot of stimulus sloshing through the system so not only was the impact short-lived, the rebound has been pretty tasty.”

Asian stocks climb after trade deal whipsaw

Asian markets rose following Trump’s clarification on the state of the trade deal. 

In Japan, the Nikkei 225 climbed 0.5 per cent, while Hong Kong’s Hang Seng added 1.02 per cent. The Shanghai Composite index also closed in the green, gaining 0.19 per cent. 

Asian stocks have rallied hard since hitting a low in March amid worries about the jolt to the global economy from the coronavirus-driven shutdown.

However, Avatrade chief market analyst Naeem Aslam warned they could struggle to hold on to their gains “due to geopolitical tensions that continue to simmer in the background”.

Read more: PM to reopen cinemas, museums and galleries in England

He pointed to the Trump administration putting further restrictions on four Chinese state media outlets. 

“China has halted its poultry purchase from a Tyson plant but so far the reason behind that is mainly due to Coronavirus,” he continued. “But the fear is that the phase one trade deal between the US-China could be in jeopardy especially if Trump picks up on this matter.”