Friday 16 October 2020 3:25 pm

FTSE 100 and US stocks climb as investor fears ease

The FTSE 100 rebounded as investors returned to risk assets, having dumped them yesterday amid worries over new coronavirus restrictions, while US stocks rose on vaccine hopes and upbeat retail sales data.

London’s main stock index climbed 1.7 per cent in afternoon trading to stand at 5,929 points. That followed a 1.7 per cent tumble yesterday. The smaller FTSE 250 index was up 0.1 per cent.

Read more: FTSE 100 closes deep in the red amid new coronavirus lockdowns

The pound rose 0.1 per cent to $1.292, giving up stronger earlier gains after Prime Minister Boris Johnson said the UK should prepare for a no-deal Brexit.

Germany’s Dax also recovered from yesterday’s falls, rising 1.5 per cent. France’s CAC 40 was 2.1 per cent higher and the European Stoxx 600 had gained 1.3 per cent.

In the US, the main indices were all up more than 0.8 per cent, having also fallen yesterday.

FTSE 100 on shaky ground as restrictions loom

Countries across Europe are battling a resurgence of coronavirus. Mayors in the north of England are fighting back against strict curbs, arguing they need more economic support. This could force a national lockdown.

Nonetheless, markets recovered today after uncertainty about lockdowns caused a sharp sell-off yesterday.

Perennially volatile stock Rolls Royce was the biggest winner on the FTSE today. It jumped 9.5 per cent.

Meanwhile, food delivery companies Just Eat and Ocado rose more than three per cent, with investors anticipating a busy period if the country goes into lockdown.

Yet British Airways-owner IAG, another highly volatile stock, slipped one per cent. That was after it was fined £200m by the information watchdog for failing to adequately protect customer information.

The pound had a rocky ride after Johnson’s statement on Brexit. He said the UK should prepare for no-deal, causing sterling to give up its earlier gains.

However, the EU side pointed out that Johnson had not ended talks. The bloc said it expected there to be progress in the coming weeks.

Read more: London Tory MPs call for extra support for businesses facing Tier 2 restrictions

Neil Wilson, chief market analyst at trading platform, said: “Lots of noise for the day traders to latch on to but no trend emerging. 

He added that a “re-test of the bottom of the range at $1.27 is a distinct possibility in the near term if today’s support cracks”.

Stock markets remain nervous about Covid

In the US, the S&P 500 was up 0.8 per cent while the Dow Jones was 1.1 per cent higher. The tech-heavy Nasdaq gained 0.9 per cent.

Drugmaker Pfizer said it could apply for emergency use approval for its Covid-19 vaccine as soon as November, boosting investor optimism.

Meanwhile, data showed retail sales jumped by more than expected in September. The figures presented a more positive view of the economy than yesterday’s jobless numbers.

The dollar lost some ground, showing that investors are selling safer assets in favour of stocks. It was down 0.2 per cent against a basket of other currencies.

Read more: Donald Trump needs to get back to basics on the campaign trail

But analysts warned that the coming weeks would not be easy for markets. In the US in particular, the presidential election and lack of new stimulus pose problems.

John Hardy, head of FX strategy at Saxo Bank, said: “A cloud continues to hang over US stimulus prospects as President Trump is at odds with his own party in the Senate and with the House Democrats.”