Blow for savers as shares soar 9% before rally fizzles out 

Investors have endured the worst weekly rout on financial markets since the Great Recession, as hopes of a dramatic recovery quickly gave way to crushing disappointment.

The FTSE 100 index of Britain’s biggest listed companies shot up as much as 8.8 per cent in the hours after the market opened, as traders took their chances to buy on the cheap and short sellers began to cash in their positions.

Bruised investors piled back in as European authorities pumped more money into financial markets to combat Covid-19.

But the FTSE 100 ended the day up just 2.5 per cent – having tumbled almost 11 per cent on Thursday in the biggest sell-off since 1987. 

The limp finish means investors only managed to claw back a fraction of their losses. 

They have seen £286billion – or 18 per cent – wiped off the value of the UK’s leading listed firms since markets opened on Monday, the biggest weekly sell-off since the 21 per cent fall in the depths of the financial crisis in October 2008.

Blue-chip shares have lost £460billion – or 25.6 per cent – since Covid-19 fears began to rip through global markets on February 24.

In a sign of the chaos facing investors, British Airways-owner IAG ended the day up 4.8 per cent despite warning that it was fighting for its future.

There have been wild swings in the share prices of some of the biggest companies, with miner Anglo American crashing almost 19 per cent on Thursday before rebounding more than 8 per cent yesterday.

Neil Wilson, an analyst at Markets.com, said: ‘The volatility right now is simply staggering, but it does look like investors are keen to buy on what looks like some mightily cheap valuations. 

At some point value will take over from fear, but I’m still not convinced we’re there yet and stabilisation is still a wee bit away.’

The pound also tumbled, as investors jumped to the perceived safety of the dollar. Sterling was down more than 1.7 per cent against the dollar, at $1.235, and slipped 1 per cent against the euro to €1.113.

Despite their early enthusiasm, traders began dragging stock prices back down as they sold down large or risky positions and cautiously prepared their portfolios for any weekend developments.

Michael Hewson, chief market analyst at CMC Markets, explained: ‘They don’t want to run anything too large into the weekend. We’ve got the meeting of the EU finance ministers on Monday, so everyone will be thinking: ‘Let’s see the colour of your money.’

I think we’re on this rollercoaster for the long haul. Do you know what the economy’s going to look like in three months’ time? I don’t.’

Even another round of stimulus from European authorities was unable to give any meaningful boost to stock markets. 

The European Union announced a package of measures including a £33billion investment initiative, which will be targeted at supporting the healthcare sector, labour market and smaller businesses.

It will use £880million of EU money to guarantee up to £7billion in loans to 100,000 virus-hit firms in sectors such as tourism, retail and transport. 

The European Commission’s president Ursula von der Leyen said: ‘I am convinced that the European Union can withstand this shock.

‘But each member state needs to live up to its full responsibility and the European Union as a whole needs to be determined, coordinated and united.’

In Germany, finance minister Olaf Scholz said the country was prepared to take on additional debt, and added: ‘This is the bazooka. We’re using it to do what is necessary.’

Germany’s Dax index managed to cling on to a rise of just 0.8 per cent.

France’s CAC ended up a marginally better 2.5 per cent, while Italy’s FTSE MIB – which has been battered by the virus – jumped 7.1 per cent.

Wall Street fared much better, however, as President Trump unveiled emergency measures, which included making 500,000 tests for the coronavirus available next week and bolstering the health system. 

The Dow Jones closed more than 9 per cent higher, up almost 2,000 points.