October 09, 2020: Stock markets rose Friday as news of progress on virus treatments boosted sentiment, following a bout of volatility over the prospects for a US stimulus package.
Observers said that with Democrats and Republicans about $600 billion apart in their stimulus proposals, there was little expectation a deal would be reached before the November 3 presidential election.
“Things are still up in the air when it comes to the relief package in the US,” noted David Madden, market analyst at CMC Markets UK.
He added however that “the prospect of some form of stimulus in the US is trumping the health crisis” for stock markets.
And there has been some good news regarding coronavirus treatments.
Markets cheered a write-up in the New England Journal of Medicine reporting that Gilead Sciences' remdesivir drug resulted in “consistent, clinically meaningful improvements” in coronavirus patients, the latest positive indicator about a leading treatment.
That news follows announcements by Regeneron Pharmaceuticals and Eli Lilly earlier in the week on Covid-19 therapies that have boosted confidence in effectiveness of the treatments for the virus.
The market is “being stimulated more this week by the realization that there just might be a widespread, effective COVID treatment regimen that gets approved soon,” said Briefing.com analyst Patrick J. O'Hare.
“The gist is that, the more confidence there is in potential treatment plans, the more confidence there will be in a potential return to normal activity,” he added.
The Dow was 0.5 percent higher in late morning trading in New York, while the major European indices closed with small gains.
– Blue wave –
There is also growing expectation that Democrat Joe Biden will win the US election, with polls giving him big enough leads in battleground states that could prevent President Trump from challenging the result — a situation that would fan uncertainty.
With Democrats possibly winning both houses of Congress, bets are being put on a much bigger stimulus than the one being discussed presently.
“Investors are revelling on the (Democratic) blue wave rally bus where the first order of the day… will be to open up the stimulus taps, and stocks are rallying in kind,” said Axi's Stephen Innes.
National Australia Bank's Rodrigo Catril said the growing probability of a Biden win is settling markets which “don't like uncertainty”.
“It seems investors are embracing the prospect of a huge Biden fiscal spending plan — with concerns over higher taxes and regulation likely to be a 2021 story,” he said.
– Europe virus surge –
While US stimulus and the election are major drivers of markets, a surge in new virus infections in Europe is causing much angst, with several countries reimposing fresh containment measures and considering localised lockdowns.
Britain's economy expanded a weaker-than-expected 2.1 percent in August and remained far down on pre-pandemic levels, official data showed Friday, with the government expanding help for workers whose businesses are forced to close.
Despite a fourth consecutive monthly increase, gross domestic product was 9.2 percent below February's level, the Office for National Statistics said in a statement.
On the corporate front, pan-European stock market operator Euronext said it had agreed to buy the Milan bourse from the London Stock Exchange for 4.33 billion euros ($5 billion).
The LSE is seeking to meet EU requirements that it divest assets to win approval for its $27 billion purchase of US financial data provider Refinitiv.
– Key figures around 1530 GMT –
- London – FTSE 100: UP 0.7 percent at 6,016.65 points (close)
- Frankfurt – DAX 30: UP less than 0.1 percent at 13,0051.23 (close)
- Paris – CAC 40: UP 0.7 percent at 4,946.81 (close)
- EURO STOXX 50: UP 0.5 percent at 3,272.23
- New York – Dow Jones: UP 0.5 percent at 28,553.75
- Tokyo – Nikkei 225: DOWN 0.1 percent at 23,619.69 (close)
- Hong Kong – Hang Seng: DOWN 0.3 percent at 24,119.13 (close)
- Shanghai – Composite: UP 1.7 percent at 3,272.08 (close)
- Euro/dollar: UP at $1.1821 from $1.1758 at 2100 GMT
- Pound/dollar: UP at $1.2978 from $1.2933
- Dollar/yen: DOWN at 105.62 yen from 106.03 yen
- Euro/pound: UP at 91.05 pence from 90.91 pence
- West Texas Intermediate: DOWN 0.2 percent at $41.10 per barrel
- Brent North Sea crude: DOWN 0.3 percent at $43.23 per barrel