The London stock market is heading for its best week since April amid rising hopes that a coronavirus vaccine can trigger a faster economic revival from the pandemic than first anticipated.
The FTSE 100 index of leading UK company shares is on track to end the week more than 300 points higher, a rise of almost 7%, despite a modest sell-off on Friday as City investors bet it would still take time to deploy the vaccine and for Britainâ€™s economy to stage a full recovery.
Financial markets around the world have soared since Pfizer/BioNTech announced earlier this week that its Covid vaccine was 90% effective in protecting people from transmission of the virus in global trials. Russia also said on Wednesday that its own candidate, Sputnik V, had shown in trials it could cut the likelihood of catching the disease by 92%.
However, the continued rapid spread of the virus and the start of tougher lockdown restrictions has limited gains in stock markets as the second wave of Covid inflicts a heavy toll on the global economy.
Shares in the blue-chip London index were down by 0.5% on Friday lunchtime to trade at about 6,300, as optimism earlier this week was tempered by the prospect of a difficult winter before a vaccine becomes widely available.
Official figures show the UK economy grew at a record quarterly rate of more than 15% in the third quarter as lockdown restrictions were eased but that the recovery was losing momentum even before new curbs came in. The Bank of England forecasts GDP to fall again in the final three months of 2020.
Eurozone GDP rose by 12.6% in the three months to September, slightly below an initial estimate of 12.7%, according to official figures on Friday.
The FTSE 100 has gained by more than 700 points since the start of the month as hopes over a vaccine and Joe Biden defeating Donald Trump in the US election lifted financial markets around the world. However, the index is still down by more than 1,000 on the start of the year, before the onset of the pandemic.
The Dow Jones Industrial Average, the leading index of US company shares, has also gained, by almost 3% this week, extending a winning streak after its biggest gains since April a week earlier as Bidenâ€™s victory over Trump became clearer.
Shares on Wall Street are expected to rally further on Friday after Biden won in Arizona, flipping control from the Republicans to the Democrats in the state for the first time since 1996.
Russ Mould, investment director at the Manchester-based stockbroker AJ Bell, said: â€œInvestorsâ€™ perspective on the outlook has definitely been shifted in a positive direction by the vaccine breakthroughs and there is the promise of more news in this area in the weeks to come.â€
â€œClearly the Covid crisis is not at an end despite the positive news announced by Pfizer and counterparts in Russia â€“ perhaps it would be more accurate to paraphrase Churchill and say we are at â€˜the end of the beginningâ€™ of the pandemic.â€