Global stocks rally on US Covid treatment approval
Financial markets around the world have rallied strongly after the US government approved a coronavirus treatment using the plasma of recovered patients and hopes rose for the development of a vaccine.
Against a backdrop of growing optimism that medical advances could fuel a sustainable economic recovery from the pandemic, stocks in Europe climbed higher on Monday after gains in Asia overnight.
Share prices on Wall Street hit a fresh record high, driven by large technology companies that stand to benefit most from consumers and businesses moving online as the pandemic disrupts physical interaction.
After Donald Trump authorised on Sunday the use of convalescent plasma, a method that has been used to treat flu and measles, for Covid-19 patients, the S&P 500 index rose by 0.7% and the Dow Jones Industrial Average gained 1%.
In London, the FTSE 100 index of leading UK company shares rose by more than 100 points, ending the day up 1.7% at 6,105. Shares also rallied across Europe after overnight gains across the board in Asia, where Hong Kong’s Hang Seng index jumped 1.4%, Korea’s Kospi 200 gained 1% and China’s CSI 300 gained 0.8%.
Despite one of the biggest market crashes in history at the onset of the pandemic, shares have soared back to record highs in months.
However, the bounce-back comes despite the world economy falling into the deepest slump since at least the 1930s Great Depression, owing to a collapse in economic activity during lockdown.
In a reflection of the lasting damage, IHS Markit, a research provider, warned that GDP in some of the world’s most advanced economies could be 5% lower in 2030 compared with a scenario without Covid-19.
Britain has plunged into the deepest recession since modern records began, with gross domestic product falling by more than any other advanced economy in the three months to the end of June. However, growth is expected to rapidly recover in the third quarter, taking Britain from the bottom of the G7 growth league table to the top.
After a 20.4% decline in the second quarter, Oxford Economics forecasts growth of 15% in the three months to the end of September. However, the research consultancy said this was because the UK exited lockdown later than other countries, which had already recorded most of the benefits in the second quarter.
Despite hopes that medical advances could underpin a sustainable return to growth, analysts feared that a rise in infections this winter and a surge in unemployment could blow the recovery off-course.
Ruth Gregory, a senior UK economist at the consultancy Capital Economics, said: “Due to the combination of a large share of the UK’s GDP being generated by the sectors that are hampered the most by social distancing, and the drag from the uncertainty caused by Brexit, we suspect the UK economy will continue to lag behind its peers.”