The FTSE 100 finished the day up two per cent after cooling gains in US stocks forced the London index down from a three per cent high.
However, it still posted its second day of gains as traders became optimistic that Europe could soon relax its coronavirus lockdowns as the rate of new cases slowed.
London’s blue-chip index had surged 3.2 per cent by 2.20pm, climbing 181 points to 5,764.
By the close the FTSE 100 was two per cent up at 5,693 points.
As mentioned, this in turn sapped some energy from Europe. The DAX, which roared back into a bull market as it struck 10600, found itself trading the wrong side of 10300 as its gains were trimmed to 200 points, while the CAC fell back under 4400, more than 100 points shy of where it was at lunchtime.
“Losing almost 100 points from its intraday peak, the UK index slipped back towards 5650,” Spreadex financial analyst Connor Campbell said.
“How Europe ends up opening on Wednesday is likely going to be determined – in part at least – but where the Dow Jones and other US stocks close this evening.
“If the US markets can build up some momentum, the week’s rebound could continue. If the energy dissipates even further, however, investors might start to lose a bit of their bravado.”
A decline in daily coronavirus cases in Italy, Germany, France and Spain has prompted hopes of an easing of Europe’s coronavirus lockdowns.
FTSE 100 travel stocks performed most strongly as investors expressed optimism that the fall could see travel bans relaxed.
Diamond Princess cruise ship operator Carnival soared 25 per cent on the FTSE, while Easyjet jumped 19 per cent despite an ongoing dispute with its founder.
Rolls-Royce also surged 17 per cent. And FTSE 250 stock Cineworld jumped 40 per cent after it scrapped its dividend and broached talks with landlords during the UK coronavirus lockdown.
The FTSE 100’s jump came after it posted a three per cent gain yesterday.
Yesterday’s close came hours before Prime Minister Boris Johnson’s move into intensive care as his coronavirus symptoms worsened.
But that did not dent the FTSE 100’s limb today. Traders stayed optimistic as the daily rate of coronavirus infections slowed across Europe, in a sign strict lockdowns are working.
FTSE 100 must hit 6,000 for bull run
Coronavirus deaths in England jumped again overnight by 758, larger than the entire UK death toll yesterday.
But Josh Mahony, a senior analyst at online trading platform IG, said the wider pattern of falling coronavirus cases has helped FTSE 100 investors believe late March gains are more than a blip.
“Expectations that the health impact is already turning a corner provides confidence that perhaps this crisis is going be shorter-lived than previously predicted,” he told City A.M.
But he warned the FTSE 100’s recent rises are based more on optimism than economic data, which has painted a picture of turmoil so far.
“Thus, for the time being it seems we are caught up in this more optimistic phase that sees countries move down the other side of the peak,” he added. “This points towards further upside, but that is based on sentiment rather than the economic reality.”
However, while the FTSE 100 has now posted a series of rises after massive drops, one analyst said it should step above 6,000 points to enter a bull run.
“We expect to see a decent resistance at this level,” Swissquote Bank senior analyst Ipek Ozkardeskaya said. “If cleared [that] should indicate that we are about to see a further and hopefully a sustainable positive correction in UK blue-chip stocks.”
European and US stocks match FTSE 100 rise
European stocks also soared. Germany’s Dax surged 5.8 per cent before settling 3.7 per cent higher. And France’s Cac leapt 4.6 per cent amid hopes the coronavirus crisis is easing. The Cac later eased back to post a three per cent increase.
Asian stocks also posted a rise overnight as US stocks managed to post jumps of over seven per cent.
US stocks also jumped at their afternoon open. The Nasdaq surged 2.7 per cent ahead, while the Dow added a huge 3.7 per cent to beat 23,400 for the first time in a month. The S&P 500 jumped over three per cent.
Connor Campbell, a Spreadex financial analyst, said this left the Dow at a “mid-point between the 18000-approaching lows struck in late-March, and the 29500 all-time highs posted in mid-February”.
While a drop in coronavirus cases across Germany, Italy and Spain prompted European and FTSE 100 stocks to rise, the US has seen its own fall in daily cases.
New York governor Andrew Cuomo said yesterday that the number of cases in his state has been “effectively flat for two days”.
FTSE 100 investors eye falling coronavirus cases
The UK’s fall in daily coronavirus death numbers came as Johnson’s own condition worsened.
“If the UK numbers just stabilise today that will be a big deal,” Deutsche Bank analyst Jim Reid said. “Over the last three weeks Tuesday’s numbers have been notably higher as the weekend data gets properly absorbed.”
And Swissquote Bank’s senior analyst, Ozkardeskaya, said traders want consistent patterns rather than one-off pieces of good news. “What really matters to investors is the trend in new cases and deaths rather than the actual numbers,” she told City A.M.
“The stagnation of new cases, and the possibility of seeing the number of new cases entering a negative trend should keep investors positive, as that would signal that the worse is now behind us and it’s time for recovery.”
“The FTSE 100’s second day of large gains is mostly due to a global improvement in risk appetite with the plateauing new cases in the coronavirus hotspots,” Ozkardeskaya added.
She pointed to jumps in energy and commodities stocks on hopes the oil price war will shortly end.
And she also highlighted transport stocks rising, with investors hoping the world will soon ease coronavirus travel bans.
“We believe that the end of confinement by Easter is still a wishful thinking,” Ozkardeskaya added.
Pound recovers from Johnson plunge
The pound plunged after Johnson was moved to St Thomas’ intensive care ward yesterday, but it bounced back 0.85 per cent today to $1.233.
“Johnson’s aggravated health didn’t have a meaningful impact on the pound, meaning that his absence hasn’t led to a leadership crisis in Britain,” Ozkardeskaya said.
“This is positive news. But if the situation gets more serious, the pound could be shaken on both directions.”
Airlines and housebuilders lead FTSE 100
Also among the FTSE 100 risers were transport stocks National Express, Easyjet, Trainline, Rolls-Royce and Carnival. All posted gains of 14 per cent and above as traders expressed their optimism about a recovery.
Carnival, the owner of the Diamond Princess cruise ship quarantined over coronavirus in February, leapt 20 per cent after Saudi Arabia’s public investment fund took an 8.2 per cent stake.
“UK and European stocks started Tuesday very much on the front foot, following gains in the US and Asia overnight, and despite the shock of Prime Minister Boris Johnson’s admission to intensive care,” AJ Bell investment director Russ Mould said.
“Investors are reacting to indications that lockdown measures in the UK, US and Europe are beginning to ‘flatten the curve’ of coronavirus infections and fatalities.”
WH Smith raising £166m from investors and Carnival’s own Saudi investment to keep the firm alive also buoyed confidence in the FTSE 100.
Mould said the fundraisings show “there is still investor appetite to back businesses even in troubled times”.
“The ongoing levels of volatility in the market as it see-sawed from hope to despair are reflected in a 500 per cent increase in first quarter revenue at trading platform Plus500,” he pointed out.