US stocks have followed the FTSE 100 higher on the back of an oil price rally and hopes that economies could start to heal as countries and states lift coronavirus restrictions.
Britain’s FTSE 100 index was 1.8 per cent higher in afternoon trading at 5,856 points. It had fallen 0.2 per cent yesterday. The mid-cap FTSE 250 index rose one per cent.
At the Wall Street opening bell the Dow Jones index rose 1.2 per cent. The S&P 500 was 1.3 per cent higher while the Nasdaq was up 1.4 per cent.
European markets also rose after tumbling yesterday. The pan-European Stoxx 600 was up 1.8 per cent. Germany’s Dax was 2.1 per cent higher and France’s CAC 40 climbed 2.2 per cent.
Oil prices have risen for the fifth day in a row. They have been buoyed by hopes that storage space is freeing up and that demand will return as economies reopen
Brent crude rose 10 per cent to $30 per barrel. WTI, the US benchmark, rose 16 per cent to $23.70 per barrel.
“There’s a growing sense that the worst for the global economy is right now while lockdowns are in place and coronavirus treatments are unproven,” said Jasper Lawler, head of research at London Capital Group.
“It follows that it only gets better from here as lockdowns ease and treatments are found.”
US stocks and FTSE 100 lifted by oil price recovery
The oil price rebound helped US markets, with oil majors Chevron and Exxon Mobil both rising more than three per cent in early trading.
David Madden, market analyst at CMC Markets, said: “One of the reasons behind the painful fall in the oil market recently was because of storage concerns.”
“But some of those fears have been alleviated due to the prospect of increased economic activity, once the lockdown restrictions are eased.”
The rise in US stocks continues a remarkable recovery that began in mid-March, after markets had cratered. The S&P 500 is now only around three per cent lower for the year.
Higher oil prices also helped the energy-heavy FTSE 100, with BP and Shell both up four per cent. Energy groups and miners did well on hopes that demand will start to pick up.
Ryanair rose despite reporting a near-total collapse in passenger numbers, after it said things will improve in the coming months.
Stocks shrug off dire economic data
The FTSE 100 shrugged off data out today which showed UK car sales plunged 97 per cent in April. Stock markets have repeatedly chosen to ignore economic data and instead chosen to look towards the second half of the year.
“It is hard to be a raging pessimist when lockdowns are lifting in the next few weeks,” said Stephen Innes, chief global market strategist at Axicorp.
Italy and Spain, two of the worst-hit countries in the world, have both moved to relax curbs. In Asia, India and Thailand are easing some measures this week.
California, an economic powerhouse, said it might allow some lower-risk businesses to open as soon as Friday. Some states have already eased restrictions on shops and other activities.
Investors hope the lifting of lockdowns will repair shattered economies. Such hopes have helped them look beyond simmering US-China tensions, which have been stoked by accusations that coronavirus originated in a Chinese lab.
Investors sell European bonds on ECB tension
In Europe, investors sold government bonds after Germany’s top court said the European Central Bank (ECB) must justify its Eurozone crisis-era bond purchases.
The decision sent the euro tumbling as much as 0.6 per cent against the dollar. It was down just 0.2 per cent this afternoon at $1.088. Some investors are worried the decision could weaken the ECB in its struggle against the coronavirus fallout.
The pound recovered some of the ground it lost to the dollar yesterday. It was up 0.3 per cent at $1.248 as investors exited the safe-haven greenback in favour of equities.
Fawad Razaqzada, market analyst at Think Markets, said that sentiment remained “cagey’ due to “incoming macro data that continue to reveal that the damage from Covid-19 is worse than expected”.
“I wouldn’t be surprised if the selling resumes later today or in the week,” he said.