MARKET WRAP: Coronavirus Drug Cures Markets, Copper 1-Month High

Coronavirus drug cures markets, Copper 1-month high

08:46 am BST | April 17, 2020

Shares rise

Remdesivir: a drug for treating the coronavirus
Remdesivir: a drug for treating the coronavirus

Stocks look to be finishing the week with a flourish. News of a breakthrough with Gilead’s drug Remdesivir to treat the coronavirus has been the latest catalyst. China reported a big quarterly growth contraction, but it only narrowly missed expectations. Chinese shares lagged other regional benchmarks as the data weighed but were still able to edge higher.

European shares are reacting to the improved prospect for coronavirus treatment. Shares have opened higher on Friday. If there’s a drug that can help people quickly recover from the virus, then healthcare systems won’t be under strain, so economies can be re-opened quicker. It would then be a matter of supporting the elderly and those with underlying health conditions who would likely still need to remain isolated.

The dynamic is still bullish in markets because bad news is being cast away as priced in and the good news is justification for further recovery. We’ve moved through a very volatile week at oil prices relatively unscathed, and that’s a clue market want to move further north.

Opening calls

Dow Jones to open 627 points higher at 24,164

S&P 500 to open 65 points higher at 2864.

Gilead coronavirus drug

Shares of Gilead Sciences look set to open higher by double digits on Friday (shares popped 16% in after-hours trading). The report that set off the gains said that early data on Gilead’s coronavirus medicine Remdesivir is ‘very encouraging’. The early data referred to is a clinical trial of 125 patients at the University of Chicago with coronavirus who were all given Remdesivir and have nearly all survived with a speedy recovery within a week. If we’re playing devil’s advocate to the bullish reaction – an important word here ‘is ‘early’. It was a small trial, and there was no control group, so there’s plenty of room for error.

China GDP & copper

It is China’s first economic decline in four decades. China’s economy fell by -6.8% y/y in Q1, down dramatically from the 6% growth in Q4. Markets are acting like its a hiccup and that the longer-term growth trajectory is intact. The assumption is that it isn’t the first step to a recession in China. The soft data brings with it the assumption that Beijing will re-up the stimulus to get growth back on track.

Copper prices just edged up to a new one-month high after China GDP data was released. China is the world’s biggest consumer of copper, so it’s a good barometer for the market reaction. Copper rose back above 2.35 per lb to its highest since March 17.

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