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Rebound pushes FTSE 100 to best quarter in a decade

Louis Ashworth
City of London

The FTSE 100 chalked up its biggest quarterly rise in a decade as investors bet on a rapid rebound from the coronavirus crisis following a massive wave of support from central banks and taxpayers worldwide.

London’s blue-chip index rose 8.8pc over the past three months as stocks clawed their way back from a brutal crash in March when the pandemic hit. 

A final-day fall of 1pc took the edge off the index’s gains, but the FTSE 100 still scraped its best performance since 2010 by a whisker.

European shares have enjoyed a similar bounceback in the past few months, with the pan-continental Stoxx 600 notching up its biggest quarterly gain since the start of 2015.

Shortly after the closing bell in Europe, Wall Street’s benchmark S&P 500 was on track for its best quarter since 1998 - up 19pc.

Much of investors' enthusiasm is thought to have been driven by unprecedented spending to keep the world economy afloat, with the US federal government alone unveiling $2 trillion (£1.6 trillion) of support in March.

However, there is still a long way to go before shares regain their pre-Covid levels.

The FTSE is down 18.2pc for the year to date, with about two thirds of its constituents in the red since the start of 2020. It shrank by almost 25pc in the first quarter of the year.

The aviation, engineering and energy industries have taken the heaviest hits, but losses have been widespread amid the worst recession for centuries. 

Several heavyweight shifts pulled the FTSE 100 down on the final day, with Shell, BP, HSBC and GlaxoSmithKline all slipping. A rising pound added to pressure on London-listed international earners.

The strong rally that carried shares upwards during much of late March, April and May appears to have lost steam in the past few weeks, as a resurgence in case numbers rattles investors’ hopes of a quick and clean economic comeback.

Craig Erlam, senior market analyst at trading firm Oanda, said the rebound is now running on reserves.

He said: “The rallies are being sold into earlier and while a number of indices are seeing strong support levels for now, the momentum is definitely building against them which could be problematic if they break."

In a sign of rising nerves, gold futures broke $1,800 an ounce for the first time in eight years. The precious metal is a common safe haven at times of market stress.