World stock markets have rallied sharply on growing hopes of economic recovery later this year – as some European countries worst hit by the coronavirus further ease lockdown restrictions.
In London, the FTSE 100 climbed by 4.3%, or more than 200 points, to take the index above 6,000 for only the second time since the outbreak sent equities into meltdown at the start of March.
The rally was in stark contrast to recent grim economic data, with Japan on Monday becoming the latest country to confirm it was in recession – following Germany and France.
In New York, the Dow Jones was more than 3% higher while markets in Frankfurt and Paris bounced by more than 5%, and international oil benchmark Brent crude surged 9% to more than $35 a barrel.
The upturn came after Jerome Powell, head of the US Federal Reserve, expressed optimism that America’s economy could begin to recover in the second half of the year.
Mr Powell told US channel CBS on Sunday that once the outbreak has been contained, activity should be able to rebound “substantially”.
He also suggested that the Fed was ready to add to the already-massive programme of interventions designed to help prop up the economy through the crisis.
“We’re not out of ammunition, not by a long shot,” the Fed chairman said.
The remarks were in contrast to a bleak assessment of the downturn made by Mr Powell last week – which had prompted a sharp sell-off.
They came as parts of Europe extended their reopening.
Among the businesses to resume were cafes and restaurants admitting customers in Italy, as well as churches in the country resuming public masses, and hairdressers in Belgium were also allowed to operate once again.
Meanwhile, a minister in tourism-dependent Spain said it planned to reopen borders to visitors by the end of June.
Russ Mould, investment director at AJ Bell, said the rally was fuelled by latest data showing new COVID-19 infections and deaths have slowed considerably in Europe, where countries first started easing their strict lockdowns in a limited way a month ago.
Mr Mould said those figures were “helping alleviate some of the concerns over a second wave in the pandemic”.
Chris Beauchamp, chief market analyst at IG, said that while the market bounce “might seem odd” amid the grim economic picture, investors were looking beyond the present into the third and fourth quarters of this year.
“This is supported by the lack of any real uptick in virus infections so far in those countries that have begun more expansive reopening programmes, which perhaps means the post coronavirus world will not be quite as different to the pre-virus world as many thought,” he said.
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