FTSE 100 climbs as global markets rally on unprecedented stimulus measures
The FTSE 100 has climbed back into the green as investors eyed a fresh wave of government support for companies coming under financial strain due to the coronavirus pandemic.
The blue chip index added over five per cent just after the open but then pared back gains to stand at just over one per cent higher by mid-afternoon.
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Oil majors Shell and BP helped boost the FTSE 100 after US President Donald Trump hinted he could intervene in the oil price war raging between Saudi Arabia and Russia at an “appropriate time.”
The smaller, more domestically-focused FTSE 250 surged as much as 7.17 per cent ahead of Chancellor Rishi Sunak’s announcement of plans to help support companies and workers hit by the virus.
The midcap index gave back some gains by mid-afternoon to stand at just under six per cent up.
Although investors appear to be optimistic about the incoming measures, Spreadex analyst Connor Campbell warned: “Given the markets’ inconsistent relationship with government and central bank interventions, it’s not a guarantee that Sunak’s appearance will preserve Friday’s rebound.”
The indices’ gains come the day after the Bank of England slashed interest rates to a record low and pledged to pump £200bn into the economy through quantitative easing.
London’s recovery followed gains by global stock markets overnight, as traders reacted to an unprecedented wave of stimulus measures introduced to mitigate the economic impact of the outbreak.
Central banks across the world have slashed rates as the outbreak led to fears of a global recession, while the European Central Bank has also cut rates and ramped up its quantitative easing programme by €750bn (£700bn).
“It’s too early to say the new central bank policies are working,” said London Capital Group’s Jasper Lawler.
“There is at least an appreciation in markets that central banks aren’t taking the situation lightly. Governments are promising big things but there are big questions about how the whole thing can work. It’s a tough ask to get workers and businesses the cash they need to stay afloat in time.”
Asian markets made a partial comeback from the global stock market rout triggered by the virus, but still nursed heavy losses for the week.
Hong Kong shares added 4.86 per cent, while Shanghai gained 1.61 per cent. Japan’s stock market was closed for a holiday, but Australia’s climbed 0.7 per cent.
The FTSE 100’s gains were mirrored by its European peers this morning. Germany’s Dax and France’s CAC 40 added 4.48 and 5.72 per cent respectively. The pan-European Stoxx rose 2.80 per cent.
Major US indices opened in the green for the second day in a row, with the benchmark S&P rising 0.5 per cent and the Dow adding as much as 0.68 per cent by mid-afternoon UK time.
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Axicorp global markets strategist Stephen Innes said that the widespread fiscal stimulus measures introduced to shore up liquidity in markets is “seemingly having a positive effect given the market needed a trillion-dollar worth of help this week, to just make it to the weekend”.
However Innes warned this could be “the calm before the storm… as the nasty impact on corporate solvency will become more evident in the weeks ahead of when the demand shock filters through to the real economy”.