The FTSE 100 has recorded its biggest one-day rise since 2008 as global stock markets were buoyed by hopes of a $ 2trn (£1.7trn) US economic rescue package.
Britain’s leading share index surged just over 9%, or 452 points, higher while in New York, the Dow Jones was up by 8% just after the close in London.
It came after House of Representatives speaker Nancy Pelosi told CNBC there was “real optimism” of Congress cutting a deal with the White House in coming hours.
Germany’s Dax soared by 11% while France’s Cac 40 added 8%, building on a positive performance from Asian markets overnight.
For the FTSE, it was the biggest one-day rise in percentage terms since November 2008 when markets were gripped by volatility at the height of the financial crisis.
The rally helped ravaged global share indices claw back some ground – having lost almost a third of their values in the past month in reaction to the spread of COVID-19 and the speed by which it has forced everyday life to be closed down.
On Monday, unprecedented moves by the US central bank to bolster asset purchases – bond-buying – by an unlimited amount had only a temporary effect before markets succumbed to more selling.
Now all eyes are on the US government turning on the spending taps to support the real economy – and the businesses and households threatened with ruin by the pandemic.
Hopes of a breakthrough in Washington that will deliver the package meant stocks were buoyant despite early signs of the devastating impact that the pandemic is having on the economy.
The flash estimate Purchasing Managers’ Index (PMI) figures for March scored UK output levels at 37.1 – with a figure below 50 indicating contraction. It had stood at 53 in February.
A separate report covering the eurozone charted an “unprecedented” collapse – the output figure coming in at 31.4 – while it was a similar story in the US where evidence also pointed to a sharp reversal in growth.
Chris Williamson, chief business economist at IHS Markit which helps compile the PMI figures, said: “The surveys highlight how the COVID-19 outbreak has already dealt the UK economy an initial blow even greater than that seen at the height of the global financial crisis.”
He added: “A recession of a scale we have not seen in modern history is looking increasingly likely.”
Market falls of recent weeks have stuttered as a growing number of central banks and governments, including those in the UK, have announced action to mitigate the effects of virus disruption on markets, businesses and workers.
A notable exception, as far as stimulus is concerned, is the United States where the president is battling Democrats in a bid to get his programme agreed by Congress.
Commenting on the financial market priority, James Knightley of ING said in a report: “The pressure is now on Congress to get its act together and provide the support that the Fed cannot do – helping the vulnerable people who face the biggest health and economic consequences.”
It has been feared that deep political rivalries, in the wake of the failed impeachment process against Mr Trump, may be hampering negotiations.
The package, as it stands, would send cheques to US households and offer support for small businesses and the hard-hit travel industry.
But Democrats, who argue it favours companies too heavily at the expense of workers and public health, blocked a vote to advance the measures late on Monday.
Ahead of the market open in London, there was another deluge of listed companies reporting on their status as non-essential services closed their doors to customers.
Mulberry, the leather goods retailer, confirmed it was among chains to have temporarily shut down stores while warning investors that it now expected to report a small loss for the second half of its financial year to 28 March.
It blamed a recent slump in trading, particularly in the UK.
Banking group Santander said its chairman and chief executive would be taking cuts of 50% to their total pay packages while announcing a fund in support of medical equipment to aid coronavirus patients.
Sports Direct, which had initially indicated that its stores would remain open despite the lockdown of the high street, later u-turned in a “clarification” to say it would comply with the order.
Rival JD Sports, which has closed all its UK stores, said it was unable to give guidance on its financial year and delayed the publication of its results for the year to 1 February.