Global stocks fell after a potential antiviral drug to treat coronavirus flopped in its first clinical trial, dashing investors’ hopes for a quick medical solution to the pandemic.
In Europe, the continent-wide Stoxx 600 dropped 1.1 per cent and the FTSE 100 in London was down 1.3 per cent after markets opened on Friday. Germany’s Dax declined 1.7 per cent, after European leaders failed to find common ground on the size and form of a recovery fund for EU nations.
Despite Germany’s chancellor Angela Merkel telling fellow EU leaders on Thursday that the country is prepared to make a substantial financial contribution to help relaunch the region’s economies, investors were discouraged by the lack of agreement on the details.
“The EU Council has kicked the can down the road once again,” said Steen Jakobsen, chief economist at Saxo Bank. “All things EU existential are foremost on our radar today.”
That followed declines in markets in Asia and the US, after a Chinese trial of remdesivir showed the treatment did not improve the condition of patients or reduce the pathogen’s presence in the bloodstream.
Wall Street’s S&P 500 closed 0.1 per cent lower overnight, reversing gains of as much as 1.6 per cent. Shares in the biotech group Gilead Sciences, remdesivir’s developer, fell 4 per cent on Thursday.
In Asian trading on Friday, investors sold off shares in Gilead’s partner companies in China. Shenzhen-listed Porton Pharma, which makes drug ingredients, fell by the exchange’s 10 per cent daily trading limit after having doubled since the start of the year.
The falls helped take the Shanghai Composite index down 1.6 per cent, while the broader CSI 300 index slipped 0.9 per cent, even after the Chinese central bank trimmed one of its policy rates.
The disappointment over the development of a possible treatment came as the number of confirmed deaths globally from the coronavirus pandemic surpassed 176,000, with infections now above 2.6m.
Investors “should expect more volatility across all asset classes as we try to appropriately price in something we have never experienced before”, said Hannah Anderson, global market strategist at JPMorgan Asset Management, of the future path of the outbreak.
Futures tipped Wall Street’s S&P 500 to slip another 0.2 per cent when trading begins later in the day.
Also on Friday, Japan’s benchmark Topix index fell 0.3 per cent while South Korea’s Kospi index slipped 1.3 per cent. Hong Kong’s Hang Seng was down 0.5 per cent.
Traders in China are also becoming nervous ahead of the country’s long labour day holiday at the start of May, which is unlikely to provide its usual boost to consumption as people avoid unnecessary travel. The period could prove to be a litmus test for how China’s consumer economy is performing after the country brought its outbreak under control.
Meanwhile, oil capped off a frenzied week of trading on a high after signs that global producers were beginning to choke supply. Brent crude, the international oil benchmark, trimmed earlier gains to trade at $21.71 a barrel, up 1.8 per cent. West Texas Intermediate, the US oil marker, rose 1.8 per cent to trade at $16.79 a barrel.
The gains for oil came after it was reported that producer Kuwait had started reducing output ahead of planned cuts by Opec suppliers that are set to begin on May 1.
However, the relief rally in oil was unlikely to last “as productions cuts are unlikely to match [the] demand halt” caused by Covid-19, said JPMorgan’s Ms Anderson.