Britain’s stock market has rallied as investor confidence grew with plans to kickstart the US economy and encouraging signs of a possible treatment for COVID-19.
The FTSE 100 joined other leading share indexes in seeing gains – some 3% in London – following another volatile week caused by the devastating impact of the global coronavirus pandemic on business.
Financial markets rose as the US joined other countries in outlining plans to exit from lockdowns – aimed at curbing the spread of COVID-19 – which have wrought havoc for world economies.
The optimism was further bolstered with positive partial data from medical trials of Gilead Sciences’ experimental drug, Remdesivir, in severe COVID-19 patients.
The upbeat mood enabled traders to see past data showing China’s economy shrank in the quarter to March for the first time in decades.
Jasper Lawler, head of research at London Capital Group said: “Stocks look to be finishing the week with a flourish.
“News of a breakthrough with Gilead’s drug Remdesivir to treat the coronavirus has been the latest catalyst.
“China reported a big quarterly growth contraction but it only narrowly missed expectations.
“European shares are reacting to the improved prospect for coronavirus treatment.
“If there’s a drug that can help people quickly recover from the virus then healthcare systems won’t be under strain so economies can be reopened quicker.
“It would then be a matter of supporting the elderly and those with underlying health conditions who would likely still need to remain isolated.
“The dynamic is still bullish in markets because bad news is being cast away as priced in and good news is justification for further recovery.”
He added: “The report that set off the gains said that early data on Gilead’s coronavirus medicine Remdesivir is ‘very encouraging’.
“The early data referred to is a clinical trial of 125 patients at the University of Chicago with coronavirus who were all given Remdesivir and have nearly all survived with a speedy recovery within a week.”
But sounding a note of caution, he said: “If we’re playing devil’s advocate to the bullish reaction – an important word here ‘is ‘early’. It was a small trial and there was no control group so there’s plenty of room for error.”
Despite making gains, the FTSE blue-chip index is still on course to post modest weekly losses after the UK extended its lockdown for at least another three weeks.
A series of government measures aimed at propping up the UK’s ailing economy has helped the FTSE 100 recover about 18% from its March lows, but it is still down by nearly 25% from its January high.
Shares in Primark owner Associated British Foods rose by 3.4% after saying it was eligible to access funding under a Bank of England support scheme.
Estate agent Foxtons also saw its shares rise by 11.7% after it proposed to raise £22m by selling a 20% stake in the business and furloughed about 750 of its employees to shore up its finances.