The FTSE 100 is on course for its best month on record, boosted by growing optimism that an early coronavirus vaccine can trigger a faster than expected economic recovery from the Covid-19 recession.
The index of leading UK company shares has risen in value by more than £210bn, or 14.5%, in November and was on track on Monday to beat the previous monthly record rise of 14.4%, set in January 1989.
Financial markets around the world have soared since pharmaceutical companies announced promising results from coronavirus vaccine trials, setting the stage for a rapid economic rebound next year should mass immunisation allow business and social life to return closer to normal.
Joe Biden’s defeat of Donald Trump in the US election has also fuelled the record-breaking rally, amid hopes for an additional injection of financial support for the world’s largest economy by a Democratic White House.
The MSCI All Country index of stocks, which tracks the performance of global markets, has surged by more than 13% this month, reaching all-time highs, and is on track for its best month since it was created in 1990.
Stock markets across Europe have rallied, while Wall Street has reached record highs, with the US Dow Jones Industrial Average breaking through 30,000 points for the first time earlier this month. The price of oil has also risen by almost $10 a barrel in the past month, as investors bet that a faster economic recovery will boost energy demand.
Despite the record-breaking performance in the past month, the FTSE 100 remains more than 1,000 points down from the start of the year in a reflection of the severe damage to the economy from Covid-19. Concern is also mounting among investors because time is running out to strike a post-Brexit trade deal before the transition period expires at the end of December.
Richard Hunter, the head of markets at the financial firm Interactive Investor, said: “Investors are hoping that a last-gasp compromise will prevent the economic pain of a no-deal to both parties, and for the UK this has particular ramifications, given the parlous state of the economy both now and post-pandemic.”
Britain’s economy has sunk into the deepest recession in more than three centuries, with the coronavirus second wave and renewed lockdown restrictions expected to weigh down growth in the final three months of the year.
Analysts said the easing of restrictions this week would provide a boost to the high street in the vital Christmas shopping period. However, Covid infections remain high and there are fears of a third wave early next year before a vaccine can be fully deployed.