Stock markets struggle as antiviral drug hopes fade

NEW YORK — Stock markets struggled on Friday as hopes of quickly finding a treatment for coronavirus were dashed, and more crushing economic data delivered a body blow to confidence.

      Investors were "reacting badly" to reports the initial trials of the remdesivir coronavirus drug being developed by Gilead Sciences had flopped, Oanda analyst Craig Erlam said.

      "This was a ray of hope earlier this week and already we're learning the pitfalls of getting too excited about these cures at the early stages of testing," Erlam told AFP.

      Key European markets were all lower at the close, but Wall Street soldiered to a positive daily finish.

      Despite that, indices were down for the week for the first time in three weeks, with the Dow posting a 1.9 per cent loss.

      'Crumbs of comfort'

      The United States this week approved nearly half a billion dollars for small businesses, which cheered investors despite unrelentingly grim economic data -- including a Congressional Budget Office prediction that the economy would contract 12 per cent in the second quarter. That brings total aid approved in the past six weeks to nearly $3 trillion.

      "The market is now comfortable with the second quarter being absolutely horrible," Karl Haeling of LBBW said. "It's a time issue about when the activity will start back up."

      However, Michael Hewson at CMC Markets UK predicted markets would probably be "swinging around" in coming weeks on the success or failure of antiviral and vaccine trials "as investors look for crumbs of comfort."

      European equities were knocked also by news that EU leaders are divided over the size of a financial rescue package to stimulate the bloc's economy, left battered by the pandemic.

      "They seem to have agreed on the idea of a recovery fund while leaving the details for a future date," Erlam said.

    Britain's retail sales by volume slumped by a record 5.1 per cent last month as the country's lockdown shut stores, despite surges in food and alcohol purchases and online buying, official data showed.

      JP Morgan Asset Management strategist Hannah Anderson warned that while some countries were moving to ease lockdowns and the virus was growing at a slower rate, dangers remain ahead.

      "It is important to not conflate medical and economic data," she said in a note.

      "Obviously a deceleration in infection rates is a positive development for the economy, but progress in combating this awful disease is not the same as returning the economy to the place it was" in late 2019.

      "Investors need to understand that the risks associated with lifting public health measures too early could further exacerbate market pain," she added.

      Further pain

      Oil was volatile, but posted a modest gain. That followed a 20 per cent surge for WTI on Thursday triggered by a new flare-up between Washington and Tehran.

      Iran warned the US of a "decisive response" after President Donald Trump said he had ordered the US Navy to destroy Iranian boats that harass American ships in the Gulf.

      But storage facilities are near to bursting with demand almost non-existent -- a situation that sent the May contract for WTI to minus $40 this week.

      On currency markets, the pound fell against the euro after the EU's chief Brexit negotiator accused Britain of stalling in ongoing post-Brexit negotiations.

      A round of talks on Friday brought scant progress, raising the possibility that the current transition period will end without a deal on crucial areas such as trade and fishing.

      And among secondary stocks markets, the Sao Paolo exchange, Latin America's biggest, plunged eight per cent in morning business after the resignation of Brazil's justice minister over "political interference."