LONDON: Stock markets struggled on Friday as hopes of quickly finding a treatment for coronavirus were dashed, analysts said, and more crushing economic data delivered a body blow to confidence.
Reports said initial trials of the Remdesivir coronavirus drug being developed by Gilead Sciences had flopped.
Investors were “reacting badly” to the information, Oanda analyst Craig Erlam said. “This was a ray of hope earlier this week and already we’re learning the pitfalls of getting too excited about these cures at early stages of testing,” Erlam told AFP.
Key European markets were all lower at the close, while Wall Street trod water throughout the morning session in New York.
Michael Hewson, at CMC Markets UK, said markets would probably be “swinging around” in coming weeks on the success or failure of antiviral and vaccine trials “as investors look for crumbs of comfort”.
European equities were knocked also by news that EU leaders are divided over the size of a financial rescue package to stimulate the bloc’s economy, left battered by the pandemic.
“They seem to have agreed on the idea of a recovery fund while leaving details for a future date,” Erlam said.
The United States has approved nearly half a billion dollars in new stimulus but European leaders were split on their own measures as the world sought to salvage economies hammered by the coronavirus pandemic. Economic data released on Friday added to the bleak outlook.
German business confidence plummeted to a record low in April as firms fret over the Covid-19 fallout, the closely-watched Ifo survey said, describing morale as “catastrophic”.
Britain’s retail sales, by volume, meanwhile slumped by a record 5.1% last month as the country’s lockdown shut clothes and other stores, offsetting surges in food and alcohol purchases and online buying, official data showed.
JP Morgan Asset Management strategist Hannah Anderson warned that while some countries were moving to ease lockdowns and the virus was growing at a slower rate, dangers remain ahead.
“Obviously a deceleration in infection rates is a positive development for the economy, but progress in combating this awful disease is not the same as returning the economy to the place it was” in late 2019, she said in a note.
“Investors need to understand that the risks associated with lifting public health measures too early could further exacerbate market pain,” she added.
Published in The Express Tribune, April 25th, 2020.