Update (14:55): The FTSE 100’s rally has gathered strength after US biotech giant Gilead (GILD.O) reported positive results from a study of its remdesivir drug in the treatment of Covid-19 patients.
The UK blue-chip index rose to 6,084, up 126 points, or 2.2%, while in the US the S&P 500 opened 1.9% higher.
Hopes of a coronavirus treatment helped investors look past the 4.8% annualised fall in US gross domestic product in the first three months of the year, the biggest quarterly annualised decline since 2008, according to the Bureau of Economic Analysis’ preliminary estimate.
Gilead said in a statement to the stock market it was ‘aware of positive data emerging from the National Institute of Allergy and Infectious Diseases’ (NIAID) study of the investigational antiviral remdesivir for the treatment of Covid-19’.
‘We understand that the trial has met its primary endpoint and that NIAID will provide detailed information at an upcoming briefing,’ it added.
The company said its own study of the drug resulted in 62% of patients treated early being discharged from hospital, compared with 49% of those who were treated late.
Testing of the drug has proved a big mover of stock markets in recent weeks as investors look for signs lockdowns of economies around the world to contain the coronavirus pandemic could be eased sooner.
But markets were knocked last week when the World Health Organization accidentally published the results of a trial of the drug in China showing it did not improve patients’ conditions.
The 4.8% fall in US GDP in the first three months surpassed investors fears and economists warned worse was likely to come.
‘The report only shows the initial impact of plant closures, social distancing and other measures to slow the spread of the virus,’ said Christoph Balz, economist at Commerzbank.
‘Most restrictions only affected the last two to three weeks of March. We therefore expect a much stronger decline in the second quarter.’
(11:23) Barclays buoys FTSE
The FTSE 100 has rallied through the 6,000 mark, buoyed by banks and oil majors as Barclays reported bumper profits in its investment bank and the price of crude lifted from lows as storage concerns eased.
The UK blue-chip index rose 56 points, or 1%, to 6,014, with Barclays (BARC) among the biggest risers, up 7.4% at 105p, as strong performance in its investment banks softened the blow of a £2.1bn bad debt provision.
First quarter profits fell 38% on last year to £923m, below analyst forecasts, but income rose 20% to £6.3bn due to investment banking activity. The bank set aside £2.1bn to cover an expected spike in business and consumer loan defaults as Covid-19 forces a credit crunch.
Chief executive Jes Staley said the uncertainty over the economic downturn coupled with low interest rates meant ‘2020 is expected to be challenging’.
Gary Greenwood, analyst at Shore Capital, said Barclays was ‘one of the lowest rated’ UK banking stocks and the ‘extremely low valuation multiple appears completely inappropriate’ due to its strong balance sheet and the fact it is unlikely to need to raise money.
Shares in rival bank Standard Chartered (STAN) rose 3.7% to 404.2p. Although pre-tax profit in the first three months of the year fell to $1.2bn from $1.4bn the year before, management said they were expecting the virus-hit emerging markets the bank serves to recover this year, led by China.
The bank said it expected ‘a gradual recovery from the Covid-19 pandemic’ and the move out of recession at the end of 2020 would be ‘most likely led and driven by markets in our footprint’.
The price of oil rallied from lows as concerns over storage capacity eased. Brent crude was up 4.1% at $21.29 a barrel while US West Texas Intermediate oil rose 14.5% to $14.13 a barrel. The US crude market has been blighted by concerns over storage close to capacity at Cushing, Oklahoma, where WTI is delivered, sparking last week’s plunge into negative prices.
Data from the American Petroleum Institute showed US crude inventories rose by 10m barrels in the week to 24 April, below the 10.6m investors had feared.
The Moody’s credit rating agency has forecast WTI averaging $30 a barrel this year and moving up to $35 a barrel next year as global recession hits demand and oversupply remains.
On the FTSE 100, BP (BP) rose 3.8% to 334.5p and Shell (RDSB) was up 3.5% at £14.53, while among ‘mid cap’ stocks, oil field services businesses Wood Group (WG) surged 15.3% to 191p, Petrofac (PFC) jumped 6.5% to 179.6p, Cairn Energy (CNE) rose 3.8% to 114.8p and Energean (ENOG) traded 2.7% higher at 653p.