The blue chip index rose more than 3% to 5,582, raising hopes for a more sustained recovery after five consecutive weekly falls, with positive sentiment in the UK reflected on Wall Street and other European indices such as the German Dax.
Market gains followed reports that some European governments were considering whether or not to lift the most stringent foreclosure restrictions.
Analysts of the online trading company IG said it had led to a spate of purchases, despite the likelihood that the second quarter of the year will be characterized by plunging economic indicators.
“It may sound strange when we can expect weeks of poor data, but the simple fact is that discussions about reopening economies are now widespread, and data from Italy, Spain, Belgium and even from New York give hope that some countries have peaked and others are approaching, “said Chris Beauchamp, chief market analyst at IG.
While the FTSE gained 3%, the Dow Jones rose more than 1,000 points, or almost 6% at lunch time on Wall Street. The German Dax closed up almost 6%.
However, OANDA, a New York-based foreign exchange firm, has warned that optimism among stock market investors may dissipate once attention is drawn to the likelihood of lasting consumer caution.
“The rally in stocks will likely be short-lived as investors will soon become skeptical of the big recovery and focus on the financial stresses that will occur after several key elements of the economy do not come back to life for several months “Said senior market analyst Edward Moya.
“Travel, entertainment and physical retailing (excluding food and medicine) will see no normalcy until much later in the year. I don’t see people going to a Broadway show, a baseball game or trying to book a vacation this summer. “
In the United Kingdom, the FTSE’s gain was all the more remarkable than the dismal construction and automotive figures ravaged by the closings caused by Covid-19.
Construction suffered the largest drop in activity since the March financial crisis, an investigation revealed on Monday, although the industry was slower than other industries to close due to the coronavirus.
Figures from financial data provider IHS Markit and the Chartered Institute of Procurement and Supply (Cips) also confirmed last week that the British private sector as a whole was contracting at its fastest pace in over 20 years .
The purchasing managers ’index fell to 39.3 in March from 52.6 in February, anything below 50 represents a drop in activity. The drop brought the index back to its lowest level since April 2009 and well below economists’ average forecast of 44.0.
The monthly decrease of 13 points was the largest since the survey began in 1997, and the index may worsen further.
“The industry is stuck in quicksand and sinking deeper,” said Duncan Brock, group director at Cips.
Some construction projects have continued, with workers spaced two meters apart, allowing construction to escape the full stops seen elsewhere, such as in the hotel and restaurant industry.
Gareth Belsham, director of Naismiths’ real estate consulting, said the pursuit of certain activities, coupled with industry experience recovering from the economic crisis, should cause optimism.
“Few sectors have a more bitter and regular experience of undergoing large drops in confidence than construction.
“The battle scars by themselves will not provide protection against a simultaneous decline in demand and supply. But the fact that the declines seen during the 2008 financial crisis were worse offers some comfort. Construction has successfully weathered this storm and will do so again. “
The auto sector has been particularly hard hit in the past three weeks. All of the UK’s major automakers have closed their factories, and the industry’s trade body said on Monday that demand for new vehicles had also fallen, causing further problems for the sector.
New car sales in March fell 44% from the same month last year to 254,684 units, while first-quarter sales fell 31% to 483,557, SMMT said.
The trade organization also cut its sales forecast for this year by 23% to 1.73 million vehicles due to the impact of the coronavirus crisis.