The FTSE 100 and European stocks have staged a comeback after opening in the red, following reports that scientists may have found a breakthrough in developing a possible coronavirus treatment.
Europe’s abrupt about-turn followed an overnight rise in Asian markets, where traders were buoyed by the prospect of additional stimulus from the Chinese government.
Britain’s blue-chip index had risen 0.6 per cent by 3pm. In Germany, the Dax climbed 1.3 per cent, while in France the CAC 40 was 0.9 per cent higher.
Coronavirus ‘breakthrough’ helps FTSE 100
Reuters reported that cheerier traders were citing a Chinese TV report that a Chinese university research team has found an effective drug to treat people with coronavirus.
Sky News also reported that scientists at Imperial College London said they have made a significant breakthrough in reducing part of the normal development time of a possible vaccine from “two to three years to just 13 days”.
Oil prices also jumped. Brent crude surged three per cent to $55.60 per barrel and WTI leaped 2.4 per cent to $50.81.
It has been a wild few weeks for investors as coronavirus has ripped through China and cases have spread around the world.
The virus, which originated in the Chinese city of Wuhan, has now killed 490 people, with 65 deaths reported yesterday. The total number of infections has risen to more than 24,000.
Two people have died outside mainland China: a 39-year-old man in Hong Kong and a man in the Philippines.
Asian stocks boosted by hopes of China stimulus
Beijing has pumped billions of dollars into its financial system this week in a bid to limit the economic fallout from the coronavirus.
China’s central bank is likely to cut key interest rates on 20 February and lower banks’ reserve requirements in the coming weeks. That will see it release more cash into the economy, sources told Reuters.
“Shares in Asia rose on the hopes of fresh Chinese stimulus, but gains were capped by data showing Chinese service sector activity hit a three-month low in January,” said Jasper Lawler of London Capital Group.
Overnight the Chinese Shanghai composite index finished 1.3 per cent higher as it continued its recovery from a 7.7 per cent plunge on Monday, its first day of trading since 23 January.
Hong Kong’s Hang Seng ended the day 0.2 per cent higher, while Japan’s Nikkei finished up one per cent.
Jing Sima, China strategist at investment researcher BCA Research, said there were some positive signs that the virus was being adequately tackled.
“The economic impact on China from the outbreak will be large, but manufacturing activities in the majority of Chinese cities should resume by the end of February,” she said.
Sima said BCA maintains “an overweight stance on Chinese stocks” as it believes “China’s budding economic recovery will be delayed, but not prevented, by the crisis”.
Chris Scicluna of Daiwa Capital Markets said that although “uncertainty prevails over the true scale of the epidemic”, the last two days of stock market rises show that investors think “the impact will be contained and short-lived”.