Stocks rally after virus drug breakthrough
SHARES around the world stormed higher as investors cheered signs of life in the US economy and a ‘major breakthrough’ in the battle against Covid-19.
As the International Monetary Fund cautioned that stock market exuberance may be overdone, the FTSE 100 index rose 2.9pc or 178.09 points to 6242.79 in London.
Benchmarks in Germany, France, Italy and Spain were also on the march and on Wall Street the Dow Jones Industrial Average, S&P 500 and the technology-focused Nasdaq all gained nearly c.
The rally came despite warnings that Britain faces a ‘tsunami of job losses’ in the coming months as official figures showed more than 600,000 people have already been made redundant in the lockdown.
Instead, investors focused on upbeat figures from the US showing retail sales jumped 17.7pc in May, the biggest increase on record. The surge in sales followed two months of sharp declines and raised hopes that the world’s biggest economy will rebound quickly from the deepest slump since the Great Depression.
Welcoming the figures, President Donald Trump tweeted: ‘Wow! May retail sales show biggest one-month increase of all time, up 17.7pc. Far bigger than projected. Looks like a big day for the stock market and jobs!’
Share prices were also buoyed as UK scientists hailed by the biggest Covid-19 drug breakthrough to date.
An Oxford University trial found a cheap and widely available drug can help save the lives of patients who are seriously ill with coronavirus.
The low-dose steroid treatment dexamethasone around the country. England’s chief medical officer Professor Chris Whitty said it was ‘the most important trial result for Covid-19 so far’ and ‘will save lives around the world’.
But the IMF warned of further volatility on financial markets if economic data fails to live up to expectations, dashing hopes of a strong recovery.
‘We see striking divergence of financial markets from the real economy, with financial indicators pointing to stronger prospects of a recovery than real activity suggests,’ said IMF chief economist Gita Gopinath.
She warned the disconnect between the state of the economy and the financial markets ‘may portend greater volatility’, adding that ‘worse health and economic news can lead to sharp corrections’.