The FTSE 100 clawed back some of its losses and swung positive on Thursday, despite concerns that a resurgence of coronavirus cases in the US could stall the global economic recovery.
London’s blue-chip index closed 0.38 per cent higher at 6,147 points, after a volatile day of trading which saw it drop 0.57 per cent lower on open.
The FTSE 100 gained ground by the end of the session attempting to claw back Wednesday’s losses which saw it close down three per cent.
The growing numbers of coronavirus cases in the US has sent jitters through stocks globally. Nevertheless, Wall Street was 0.18 per cent up this afternoon while Asian suffered their biggest drop in eight sessions on Thursday.
European peers also managed to close in the green as the Dax shot up 0.5 per cent and France’s Cac gained 0.8 per cent.
A warning from the International Monetary Fund (IMF) did little to quell investors’ nerves on the FTSE this morning. It warned that the decline in growth could be worse than initially feared, and is predicting an almost five per cent decline in growth. It is significantly worse than the three per cent decline it first predicted.
“It seems that investors aren’t yet ready to heed the IMF’s advice about the gulf between the recent market rally – which has taken its knocks of late, but still leaves indices well above their end of March lows – and the realities of a global recession,” said Spreadex analyst Connor Campbell.
FTSE gains a ‘holding action’
The FTSE 100 and its European peers managed to “clock up some passable gains this afternoon” said Chris Beauchamp, chief market analyst at IG.
“Although this is more of a holding action rather than a solid rebound from yesterday’s heavy losses. The key question for investors now is whether the rise in cases is a series of localised outbreaks or the beginning of a real second wave” he added.
If the cases are just localised, markets could start to rise again but if it is indicative of a second wave then stocks could fall further.
“In one way the price action of the past two days looks similar to previous drops since March – a quick and dramatic fall that is then steadily clawed back,” Beauchamp said.
Wall Street stumbles as cases rise and jobless claims remain high
US stocks gained after dipping on open but investors remain jittery on the prospect of a second wave.
Cases in the US are rising with Florida, Oklahoma and South Carolina reporting a record number. While seven other states recorded higher numbers earlier this week, with Texas considering a local lockdown to curb the spread of the virus.
As the situation worsens, news came of President Donald Trump’s administration closing federal funding for 13 Covid-19 testing sites, according to CNBC. This includes one in Texas where 5,500 new cases were reported in just one day and hospitals reach capacity.
The Dow Jones rose 0.17 per cent while the benchmark S&P 500 edged up 0.17 per cent. The tech-heavy Nasdaq Composite is trading up 0.25 per cent after reaching record highs last week.
A barrage of economic data did little to help stocks regain the losses of the week. Weekly jobless claims rose to 1.48m, fewer than in the previous week, while continuing claims decline to 19.5m.
“The outlook, however, is deteriorating as inconsistent guidance from public officials combined with the failure of individuals to comply with the most basic Covid avoidance measures have led to another surge in infections,” said Ronald Temple, head of US equity at Lazard Asset Management.
“These unforced errors are increasing the risk that cities and states may be forced to pause or even reverse reopening which could derail the nascent economic recovery.”
The government also confirmed that the US economy contracted by five per cent in the first quarter, in line with expectations.