The FTSE 100 surged today despite dire Chinese economic data as investors are cheered by hopes of a medical breakthrough and signs that the US is on its way to reopening parts of its economy.
Britain’s FTSE 100 index finished 2.8 per cent higher at 5,786 points. It had climbed as much as 3.4 per cent in morning trading as investors looked to the US, where a trial of Gilead’s coronavirus drug remdesivir showed positive signs.
The pan-European Stoxx 600 also surged, by 2.4 per cent. Germany’s Dax jumped 3.1 per cent and France’s CAC 40 rose 3.4 per cent.
China’s economy shrank for the first time since records began in the first three months of the year, official data showed today, by 6.7 per cent.
But “the markets are already treating today’s GDP print as a backward-looking measure,” said Matthew Cady, investment strategist at investment manager Brooks Macdonald.
Investors were instead fixated on events in the US, where a report said drug firm Gilead may have developed a treatment that effectively tackles coronavirus, according to early trials.
Medical news site Stat reported that University of Chicago Medicine’s trial of the Gilead drug recruited 113 people with severe Covid-19. It said most of them have been discharged but two patients died.
FTSE 100 hopes for return to ‘normality’
Jasper Lawler of London Capital Group said the FTSE 100 and European shares “are reacting to the improved prospect for coronavirus treatment”.
Yet he added: “It was a small trial and there was no control group so there’s plenty of room for error.”
Investor optimism has also risen after President Donald Trump last night released guidelines saying it was up to states to choose when to lift social distancing measures.
The first steps towards some clarity about when economies might reopen, combined with the prospect of an effective drug treatment, has solidified hopes that an economic recovery could be around the corner.
“There is a clear optimism over the possibility that some semblance of normality could soon return,” said Joshua Mahony, senior market analyst at trading platform IG.
“Stocks associated with global travel have received a welcome boost as traders react to plans from the likes of Germany and the US to ease lockdown restrictions,” he said. Rolls-Royce, Carnival, Intercontinental Hotels, and IAG have all risen.