Global financial markets have rallied on rising hopes for a coronavirus vaccine and a smooth recovery for the world economy as governments gradually ease lockdown restrictions. In the UK the FTSE 100 rose by 1.2% or 74 points as countries around the world begin the lengthy task of reopening their economies as the health emergency shows signs of gradually easing. Airline company stocks, holiday firms, pubs and cinema groups were among the biggest risers on London’s stock market on Tuesday, after Boris Johnson signalled plans to further lift restrictions on high street shops from next week. Shares on Wall Street were up more than 2%. The Dow Jones Industrial Average gained almost 600 points, hitting more than 25,000 in early afternoon trading in New York as investors bet on a swift global rebound from the Covid-19 crisis. The S&P 500 index of leading American company shares rose above 3,000 for the first time since March, as stocks gradually regain ground lost during the sharpest market crash in a generation suffered at the onset of the pandemic. Investors in the London stock market were boosted by the prime minister setting out a timeline for the reopening of outdoor markets and car showrooms in England from 1 June. High street shops, department stores and shopping centres will all be allowed to open from 15 June as long as they can show they are “Covid secure”, the prime minister said on Monday. Analysts said updates from pharmaceutical companies working to develop Covid-19 vaccines were also encouraging investors to push share prices higher, despite the extensive economic damage caused by lockdown controls and fears that no vaccine will be found. Shares in US biotech group Novavax rose more than 17% after it announced it had joined the race to test vaccine candidates on humans and enrolled its first participants. Shares in the drug company Merck also rose after it announced plans to develop two separate vaccines. However, there were warnings financial markets were failing to reflect the unfolding economic damage and risk of a slow and lengthy recovery from what is expected to be the worst recession in living memory. Joshua Mahony, senior market analyst at the trading platform IG, said: “Once again there is a feeling that traders are wearing blinkers as we head higher. “As stock markets continue to close the gap created by this crisis, questions over quite when this rebound will end become more prominent than ever.” The prime minister’s move to reboot the retails sector comes as world leaders announce tentative steps to lift tough controls on business and social life that had been used to limit the spread of Covid-19 but also brought the world economy to an effective standstill. Japan has formally exited its national state of emergency, while Germany is moving to ease travel restrictions from mid-June. Airline and hotel companies, among the hardest-hit companies as the Covid-19 emergency brought global travel to a standstill, were the best UK performers , as British Airways owner International Airlines Group (IAG) soared 22% and budget carrier EasyJet rose 19%. Whitbread, the pubs group and owner of the Premier Inn chain, rose 10%. Jet engine maker Rolls-Royce climbed 12%, while cruise operator Carnival was 13% higher. Alongside the gains on the leading index of UK company shares, the more UK-focused FTSE 250 index closed up by more than 3%. Europe’s largest travel group Tui, which has also received a German state bailout, surged 52%, and pubs group Mitchells & Butler jumped 26%. Cineworld gained 19%. European shares hit an 11-week high, with investor sentiment also boosted by Germany’s €9bn (£8bn) bailout of the Lufthansa airline. “Travel and airlines stocks have had a pretty decent day on the back of a combination over the planned reopening of European holiday destinations sometime in July, as well as yesterday’s reports that German national carrier Lufthansa is on the brink of a controversial €9bn bailout from the German government,” said Michael Hewson, chief market analyst at CMC Markets UK. Retailers were also among the gainers on Tuesday, with clothing chains JD Sports up 10% and Next up 5%. However, a continuing stock market rally depends on whether lockdown measures can be further eased, said Russ Mould, investment director at stockbroker AJ Bell: “Another key unknown is the extent to which a period in effective quarantine has affected consumer behaviour. This could take longer to become apparent.”