THE FTSE 100 has jumped by 5.5% following the news from Pfizer that a Covid-19 vaccine trial has worked better than expected.
The surge has added £82billion to shares in the market’s best day since June.
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It later dipped to 6,186.29 but still finished up by 4.67%.
It did not perform as well as it did in June when the markets surged to 6472.59, but is more promising than at the start of the pandemic.
On March 12, 2020, the markets crashed 10.9% in a day to finish at 5,237.00 points, in one of the worst days since Blank Monday in 1987.
How the FTSE 100 falling affects your personal finances
FALLS in the stock market can affect your finances in a number of ways, here we explain how.
Pensions – If you save cash into a pension scheme where the provider invests your money, you’ll likely see the value of your pension drop when the FTSE 100 falls.
But keep in mind that with retirement savings, you’re investing for the long-term so the drop in value isn’t likely to be permanent.
Instead, you’ll see your retirement savings grow again once the stock market recovers.
Savings and mortgages – There is no direct link between the stock market and your mortgage or savings accounts.
But if panic on the stock market spreads to the wider economy, the Bank of England may cut interest rates. Interest rates are currently held at 0.1%.
This means your mortgage is likely to get cheaper, while savers will suffer from lower interest rates.
We’ve explained how the interest rate cut will affect your finances here.
Sterling – The value of the pound often rises if the FTSE 100 falls.
This is because many of the firms on the index earns a significant amount of cash in the US.
But again, exchange rates are also volatile and there are many factors that make them rise and fall.
The American pharmaceutical giant Pfizer says interim findings from its large-scale clinical trial were more than 90% effective in preventing the disease.
Drugmakers are now expected to seek US emergency use authorisation later this month in a major victory in the fight against Covid-19.
The UK has 10million doses of the Pfizer vaccine that could be rolled out by Christmas, once it is approved by regulators.
The footsie index tracks the performance of the UK’s 100 biggest companies.
It was already up over the weekend following Joe Binden’s victory in the US Presidential Election.
Companies that have been hit hard by the pandemic, such as British Airways owner IAG and engine maker Rolls-Royce, have jumped in the hope a vaccine could see the economy return closer to normal.
On the FTSE 250, Cineworld rose by 38%, Trainline added 33%, easyJet, Tui and cruise operator Carnival were up about 28%.
But businesses that have been cashing in from the crisis took a hit.
Ocado, which has seen sales soar because of lockdown, dropped 8.5%, JustEatTakeaway.com lost more than 5%, and Reckitt Benckiser, which makes Dettol, fell 5%.
Meanwhile AstraZeneca, a rival to Pfizer in the race for a vaccine, hardly budged at all.
European stock markets have also reacted positively to the breakthrough.
Frankfurt’s markets shot up by 6%, while Paris soared by 7.1%. In Milan, the markets rose by 6.2% and 9.4% in Madrid.
The Dow Jones in the US was up by 5.4% ahead of the Wall Street open.
Laith Khalaf, financial analyst at AJ Bell, said: “While the tremendous vaccine result is likely to underpin markets from here, investors shouldn’t be too gung-ho with their portfolios.
“Many stock prices have jumped in response to the news already, and so already reflect an improved outlook.
“Often the initial knee-jerk response of markets to big events, positive or negative, is an over-reaction which is tempered over time.
“The vaccine result clearly raises hopes that a return to normality is within touching distance, and while that is extremely positive for markets and businesses, we should be mindful that the economic impact of the pandemic is still being felt around the globe.”
The FTSE 100 is often influenced by political factors. Last month, it fell by 1% after Donald Trump tested positive for Covid-19.