The FTSE 100 rallied 4.4% on Tuesday morning despite the UK going into lockdown and facing a massive recession “not seen in modern history”.
Prudential was the strongest riser in the UK index up 14.69%, while M&G was up 11.13%.
On Monday night prime minister Boris Johnson confirmed people would only be able to leave their house for essential household items, medical care, daily exercise or, where “absolutely necessary”, to travel to and from work.
The lockdown comes as the latest UK purchasing managers index (PMIs), released on Tuesday morning, show coronavirus has dealt an initial blow even greater than that seen at the height of the global financial crisis.
March PMIs are the ‘tip of the iceberg’
The flash UK composite outlook index reading came in at 37.1, the lowest on record since surveys began in 1996. That compares to a reading of 53 in February.
The March surveys point to GDP falling at a quarterly rate of 1.5% to 2% tipping the UK economy into contraction for Q1, IHS Markit chief business economist Chris Williamson said.
“However, this decline will likely be the tip of the iceberg and dwarfed by what we will see in the second quarter as further virus containment measures take their toll and the downturn escalates.”
The data signalled a fall in employment and services to an extent not seen since July 2009, the IHS Markit release said.
Lockdown may comfort investors after benefits seen in Wuhan
AJ Bell investment director Russ Mould said encouraging Covid-19 case numbers coming out of Wuhan after its strict lockdown could be driving the performance of the FTSE this morning.
“You can see lockdown policies elsewhere potentially bring some benefit in in a few weeks’ time,” Mould said.
Additionally, investors may think a lot of bad news is already reflected in stock prices, he said, although he felt it was a bit early to call.
The last Chinese services PMIs came in at 29.6 with manufacturing at 35.7, he noted, stating it was possible the UK could reach that point now it is in full lockdown. The next Chinese PMI figures will be released on 31 March.
A breakdown of the UK PMIs
Services led the sharp fall among the surveys, also hitting a record low at 35.7 compared to a February figure of 53.2.
In November 2008, its previous low, services posted a reading of 40.1.
Hotels & restaurants and other leisure activities such as sports centres, gyms and hair salons were by far the worst affected service sectors, IHS Markit said.
The figures were compiled before the UK government ordered pubs, restaurants and other leisure businesses to close by midnight 20 March.
The UK manufacturing output index fell from 52.2 in February to a 92-month low of 44.3 in March. The UK manufacturing PMI fell to a three-month low of 48 compared to 51.7 in March.
“Any growth was confined to small pockets of the economy such as food manufacturing, pharmaceuticals and healthcare,” said Williamson. “Demand elsewhere has collapsed.”
