Stocks rally strongly as US approves COVID-19 treatment

Stock markets around the world rallied on Monday, amid optimism about a new COVID-19 treatment and a potential vaccine.

Stocks surged at the start of the week after the US Food and Drug Administration (FDA) issued an emergency use authorisation on Sunday linked to the treatment of COVD-19. The order approved the use of blood plasma from patients who have recovered from COVID-19 to treat the novel coronavirus.

US President Donald Trump said in a press conference the treatment had reduced mortality by 35% in a small study of patients by the Mayo Clinic. He called the approval a “very historic breakthrough” and said the public would be hearing about vaccine developments “very soon.”

Over the weekend, the Financial Times reported that Trump was considering fast-tracking approval of an experimental COVID-19 vaccine being developed in the UK. Trump wants the Oxford university vaccine to be approved before November’s election, according to the report.

The FTSE 100 (^FTSE) ended the day up 1.7%, while the DAX (^GDAXI) and CAC 40 (^FCHI) both gained 2.3%. The IBEX 35 (^IBEX) climbed 1.9%, and the FTSE MIB (FTSEMIB.MI) was up 2.1%.

Naeem Aslam, chief market analyst at Avatrade, said the FDA approval was “supporting the risk on rally.”

READ MORE: Eat Out to Help Out is propping up Wetherspoon during COVID-19

Pharmaceutical stocks rallied across the continent. AstraZeneca (AZN.L) rose 2% in London, while rival GlaxoSmithKline (GSK.L) gained 0.6%. In Germany, Merck (MRK.DE) rose 2.3% and Bayer (BAYN.DE) rallied 3.1%.

Away from COVID-19, BT (BT-A.L) jumped to the top of the FTSE 100 amid speculation it could be vulnerable to a takeover attempt. The stock ended the session up 7%.

Wall Street mirrored the optimism in Europe. The S&P 500 (^GSPC) and Nasdaq (^IXIC) both rose to new record highs. The S&P 500 was up 0.7%, hitting a new all-time high above 3,420, and the Nasdaq had gained 1.3% to hit 11,461. The Dow Jones Industrial Average (^DJI) rallied 0.9%.

After becoming the world’s first $2tn company last week, Apple (AAPL) once again made history on Monday as its stock rose above $500. Shares were up 3% to $512.39 shortly after the open. Tesla (TSLA) and Google (GOOGL) also recorded new all-time highs.

Equities had risen across Asia overnight, albeit with much more muted gains than those seen elsewhere. The Nikkei (^N225) rose 0.2% in Tokyo, Hong Kong’s Hang Seng (^HSI) added 1.5%, the Shanghai Composite (000001.SS) climbed 0.1%, and the Shenzen Component (399001.SZ) rose 1.4%. In Australia, the ASX 200 (^AXJO) rose 0.3%.

The rally came despite worrying COVID-19 news from the region. New Zealand announced an extension of its lockdown until 30 August and South Korea reported another 266 new COVID-19 cases in the last 24 hours, raising the spectre of a lockdown. Academics in Hong Kong also reported the first known incident of COVID-19 re-infection.