Coronavirus: Stock markets rebound as Trump pledges tax cut after Black Monday

FTSE 100 in partial recovery after bloodbath that saw £124bn wiped off leading UK-listed companies' valuations in one day

A mask-clad pedestrian passes in front of a quotation board displaying the share price numbers of the Tokyo Stock Exchange (AFP/Getty)

European stock markets rebounded on Tuesday after a rout on Monday that saw £124bn wiped off the combined value of FTSE 100 companies.

The UK’s blue-chip index of large firms rose 2 per cent in early trading to 6,086.76, erasing some of the previous day’s plunge – the index’s worst since the 2008 financial crisis.

The FTSE 250, which comprises the UK’s 101st to the 350th largest listed companies, rose 1.8 per cent while, across the Channel, France’s CAC 40 index was up 2 per cent.

The rise came despite increasingly severe measures implemented to contain Covid-19. Italy announced a month-long, nationwide lockdown on Monday, including travel restrictions and a ban on public gatherings.

European share prices followed Asian markets into recovery territory after US president Donald Trump announced he would ask Congress for a tax cut and other measures to combat the economic damage caused by coronavirus.

China’s main stock index rose 1.8 per cent and in Tokyo the Nikkei added 0.9 per cent. Hong Kong was up 1.5 per cent and shares in Sydney gained 3.1 per cent.

Oil prices also recovered some of their losses after a record-breaking fall during Monday’s session which came as Saudi Arabia announced plans to flood markets with crude.

With demand already falling in response to the virus outbreak, oil prices had tumbled by almost a third when the first markets opened in Asia on Sunday evening. The falls spread to Europe and the US, where the New York Stock Exchange was suspended for 15 minutes following a 7 per cent crash at the start of trading.

On Tuesday morning, Brent Crude rose 7 per cent to $33.59, still less than half its level in January. West Texas Intermediate, a key US benchmark, rose almost 8 per cent.

If current prices are sustained, the future of much of the US oil industry is under threat, a situation that will not help Donald Trump’s re-election bid in November.

During Mr Trump’s presidency, the US has surpassed Saudia Arabia and Russia to become the world’s largest oil-producing nation.

However, the US cannot compete when the price of crude is low as American shale producers face significantly higher costs than Saudi Arabia’s state-owned oil company Aramco and some other Opec nations.

Europe also faces economic damage from the coronavirus outbreak with analysts at Investment banks Morgan Stanley and Berenberg both forecasting recession in the first half of the year.

“The Italian measures – and the possibility that other parts of Europe may move in the same direction in coming weeks – are likely to weigh significantly further on confidence in the near term,” said Holger Schmieding, chief economist at Berenberg.