The FTSE 100 has risen in afternoon trading on a volatile day for global stock markets following the signing of a $2 trillion (£1.7 trillion) US coronavirus stimulus package.
London’s blue-chip index was two per cent higher at 5,557 by 4pm after swinging in and out of negative territory earlier in the session.
European stocks were broadly higher, with the pan-European Stoxx 600 index 0.7 per cent higher and France’s CAC up 2.1 per cent. Germany’s Dax was down 0.6 per cent, however.
Things were similarly mixed on Wall Street, where the Dow Jones had risen 2.7 per cent, the S&P 500 was up 0.8 per cent, but the Nasdaq was down 0.1 per cent.
The market volatility came the day after global equities surged following the announcement of yet more bond-buying from the US Federal Reserve and as Congress edged closer to signing the huge stimulus deal.
The Dow Jones rose more than 11 per cent yesterday while the FTSE 100 climbed nine per cent.
Yet analysts today said markets have been pulled in two different directions, with one eye on the stimulus measures and the other on the likely deep recession coronavirus will cause.
“This current pullback looks like it could be a case of ‘buy the rumour, sell the fact’ as traders begin to turn their attention away from the US stimulus package,” said online trading platform IG’s senior analyst Josh Mahony.
“The global slowdown appears impossible to fully prevent. And thus there was always likely to be further downside after the dust settles.”
Investors await details of stimulus package
Investors, households and businesses are yet to be told the full details of the US stimulus package, which was signed off by Congress after lengthy negotiations between President Donald Trump’s team and Democrat leaders.
It seeks to avert catastrophic damage to the US economy, which is set to fall into a deep recession due to containment efforts such as state-wide lockdowns and the closure of main stress businesses, offices and factories. Such a prospect has weighed on the FTSE 100 and other indices in recent weeks.
Under the package, the government is expected to take the unprecedented move of sending cheques worth up to $1,200 direct to Americans. It will also contain hundreds of billions of dollars of loans to struggling US businesses, although the exact numbers are not yet known.
Republican Senate majority leader Mitch McConnell said the US package “is a wartime level of investment into our nation”.
The stimulus sent Asian stocks higher overnight. Japan’s Nikkei surged eight per cent, Hong Kong’s Hang Seng rose 3.6 per cent and China’s SSE Composite rose 2.2 per cent.
Mark Haefele, chief investment officer at UBS Global Wealth Management, said: “We think the actions of monetary and fiscal policymakers should help us prevent a global financial crisis-style credit crunch.”
Are stock markets stabilising?
Yet the recent trend of investors shrugging off huge stimulus packages appeared to repeat itself somewhat today, holding back indices such as the FTSE 100.
Dire survey data from Germany that predicted a deep recession served as a reminder to traders of what is yet to come.
“It was perhaps always going to be tough to maintain the pace of gains seen on Tuesday,” said Connor Campbell, market analyst at trading platform Spreadex. “It isn’t a great sign, however, that there are patches of red this Wednesday despite the $2 trillion stimulus package agreement in the US.”
However, Neil Wilson, analyst at Markets.com, said he would “prefer to see smaller daily swings to believe that stabilisation, or even a market bottom, has been established” for the FTSE 100 and other indices.
He said the question now is whether the stimulus is enough to prevent a jump in deaths in the US and Europe and the economic damage from sending markets lower again.