Hang Seng Index on course for weekend rally as oil prices recover

The Hang Seng Index opened Friday trading 0.6% down on its previous close, starting the day at 23,844.55. That downward trend continued in the early trading hours, with the index making a brief stop below 23,750.00.

A challenging week ended with the Hang Seng Index recouping some of the losses from its morning performance, entering the weekend of trading at 23,886.03.

Oil was the dominant factor behind Hang Seng fluctuations earlier in the week, with crude prices reaching new lows and causing panic among investors.

The index appeared to be rallying alongside oil prices as the week progressed, although some of that recovery has been undermined by the Friday news that a potential antiviral drug for coronavirus has failed in its first clinical trial.

Hang Seng and oil rebound from Tuesday woes to deliver short-term optimism; long-term outlook remains bleak

This week witnessed the biggest daily fall on the Hang Seng Index in around a month. As West Texas Intermediate (WTI) crude futures sank below zero for the first time in history, the Hang Seng Index shed 2.2% on 21 April.

Negative prices meant that the WTI, the US benchmark for oil prices, had to pay traders to take the oil off their hands as part of the May contract. This unprecedented event unsettled investors, with the Hang Seng Index declining as traders sought to remove their exposure to assets affected by the continuing crude crisis.

WTI and Brent, the global benchmark, recovered some recent losses as the week progressed, with major stock indices similarly able to make gains. The Hang Seng Index ended with an overall 2% decrease in the week of trading, but rose by 0.04% following that Tuesday low.

The Hang Seng Index may enjoy a respite from oil-driven losses, at least until the expected issues about fulfilling June contracts arise.

Failed coronavirus drug trials set to shrink global markets, derailing the late-week rally of the Hang Seng Index

This time last week, the Hang Seng Index was heading into the weekend with reason for cautious optimism towards the pandemic response.

Positive noises were emanating from the clinical trials undertaken by Gilead Sciences, the American pharmaceutical company. On Friday 24 April, markets reacted to the news that these trials had proven unsuccessful.

The World Health Organisation erroneously posted a draft report that showed that the China-based trial of the drug remdesivir had failed. The WHO subsequently took down that report, but its findings provoked that 0.6% fall on the Hang Seng Index at Friday's open.

The summary of the report stated that 'remdesivir was not associated with clinical or virological benefits'.

Gilead has countered the WHO's conclusions, declaring that further trials are required before ruling out the use of remdesivir. A spokesperson for Gilead indicated that 'trends in the data suggest a potential benefit' for the antiviral drug.

The quest for a medical solution to the spread of coronavirus will be an ongoing theme in market movements in the weeks and months ahead. While the news of the failed trial initially caused the Hang Seng Index to retract, the market may recover over the weekend as traders adjust their expectations about when a coronavirus vaccine may emerge.

Market acceptance of the remdesivir news could send the Hang Seng Index back on course for a weekend rally from its plunge earlier in the week.

While the long-term picture for oil remains bleak, prices are unlikely to drop below zero again in the immediate future. This could give the Hang Seng Index a platform over the weekend to continue to recoup its weekly losses.

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