It was not just the FTSE 100 which moved sharply higher for the second day running. As bargain hunters returned after the recent hefty falls, markets across Europe and in the US recorded big gains despite talk of possible recession following the Brexit vote. Analysts said buyers had also moved back into the market as they realised that despite the referendum, the UK would not trigger Article 50, setting the exit from the EU in motion, for months, given the political turmoil in the country. The final scores showed:
The FTSE 100 finished up 3.58% or 219.67 at 6360 regaining all its losses and more since the Brexit vote
The FTSE 250, more focused on the UK domestic economy, ended 3.22% higher at 16,002.90 but is still down 7.6% since Thursday
Germany’s Dax rose 1.75% to 9612.27
France’s Cac closed up 2.6% at 4195.32
Italy’s FTSE MIB added 2.21% to 15,946.93
Spain’s Ibex ended up 3.45% at 8105.3
In Greece, the Athens market edged up 0.6% at 541.88
On Wall Street, the Dow Jones Industrial Average is currently up 227 points or 1.3%.
Meanwhile the pound has added 1% to $1.348 and 0.75% to €1.214.
On that note, it’s time to close for the evening. Thanks for all your comments, and we’ll be back tomorrow.
The FTSE 100 has closed up 3.58% and has regained all its losses and more since the referendum. Chris Beauchamp, senior market analyst at IG, said:
The contrarian nature of markets has never been more apparent than in the past few days. We could all understand the selloff seen on Friday and then again at the beginning of this week, but the storming rally on the FTSE 100, which has seen the index rally over 7% from Monday’s low, is much harder to explain, other than via the usual combination of short-covering and bargain hunting.
The market has certainly been quite sanguine in its assessment of the situation, noting that, technically, nothing has really changed in the UK’s relationship with the EU, and that even negotiations about negotiations have yet to start. It is safe to say that, of all the post Brexit outcomes discussed across the City over the past few months, ‘buying frenzy’ was not one that was viewed as very likely. Today’s list of top risers is somewhat more diverse than yesterday, with miners enjoying healthy gains, although once again UK-focused names like house builders and insurers predominate.
Elsewhere a whistleblower who leaked details of corporate tax deals was found guilty of theft, writes Simon Bowers:
A former employee of PricewaterhouseCoopers has been convicted of theft after a court in Luxembourg found he was behind an unprecedented leak of controversial tax deals privately granted to many of the world’s largest corporations.
A judge in Luxembourg told Antoine Deltour he would avoid jail but must receive a 12-month suspended sentence and a fine of €1,500 (£1200). He found Deltour guilty on charges including theft and violating Luxembourg’s strict professional secrecy laws.
In 2014, Deltour won widespread praise for helping bring to light hundreds of controversial tax deals granted in previous years by the Luxembourg tax office. The revelations helped lay bare the tax arrangements of companies including Burberry, Pepsi, Ikea, Heinz, Shire Pharmaceuticals and others.
The Bank of England has announced that governor Mark Carney will give a speech there on Thursday at 4pm. There are no details as to what he might say, a week after the referendum, but there is of course speculation:
Markets continue to move higher, and could get a further boost after the US Federal Reserve releases its latest annual bank stress tests later (see here), says Connor Campbell, financial analyst at Spreadex:
Against the odds this post-Brexit rebound has carried through to a second day; not only that but, if analysts are correct, the markets may well receive a boost this evening in the form of the Federal Reserve’s bank stress test results. If the US banking sector proves its resilience in the face of the Fed’s imaginary scenarios it may reassure investors that the institutions can deal with the fallout of Britain leaving the EU, therefore extending the rebound into Thursday. If the report uncovers too many weaknesses, however, the market’s recent gains may be undermined.
The National Association of Realtors index for pending home sales - contracts to buy previously owned homes - fell 3.7% to 110.8 in May. Analysts had expected a fall of 1.1%, according to Reuters.
The index is 0.2% lower than in May 2015, declining year on year for the first time in almost two years. Lawrence Yun, the association’s chief economist, said:
With demand holding firm this spring and homes selling even faster than a year ago, the notable increase in closings in recent months took a dent out of what was available for sale in May and ultimately dragged down contract activity. Realtors are acknowledging with increasing frequency lately that buyers continue to be frustrated by the tense competition and lack of affordable homes for sale in their market.
Yun said the fallout from the Brexit vote provided headwinds but also opportunities:
In the short term, volatility in the financial markets could very likely lead to even lower mortgage rates and increased demand from foreign buyers looking for a safer place to invest their cash.
On the other hand, any prolonged market angst and further economic uncertainty overseas could negatively impact our economy and end up tempering the overall appetite for homebuying.
Over at the ECB Forum in Portugal a number of central bankers, including ex-ECB head Jean-Claude Trichet and former Bank of England MPC member and deputy governor Charles Bean, are discussing Brexit:
There may be warnings of a UK recession, and concerns that market volatility will continue for some time, but investors are still keen to push shares higher.
In the US, Wall Street has followed the lead of other global markets and opened sharply higher. The Dow Jones Industrial Average is currently up 145 points or 0.85%, while the S&P 500 opened 0.7% better and Nasdaq 0.8% better.
The FTSE 100 is still around 2% higher although off its best levels, while Germany’s Dax is up 1.7% and France’s Cac up almost 2.5%.
Stock markets are staging a remarkable rally today, as investors manage to put aside worries about Britain’s Brexit crisis.
The FTSE 100 index is up 135 right now, a gain of 2.2%. That means it is positive for 2016 again, and only around 60 points below last Thursday’s figure, when Britain headed to the polls.
The top riser right now is building firm Taylor Wimpey (+7%), followed by a clutch of other builders, plus mining companies and major exporters.
The pound is also gaining ground, up 1.5 cents today at $1.35. That’s around 4 cents higher than Monday’s 31-year low, but still 10 cents below pre-referendum levels.
The rally comes despite a tidal wave of warnings about Brexit, and signals from Brussels that negotiations over Britain’s withdrawal will be tough.
Claims that Morgan Stanley and Goldman Sachs are renting office space in Frankfurt, ready to move jobs from the City, have been denied
Britain’s refusal to pull the trigger on Article 50, to leave the EU, has left Europe in the dark. But it also - paradoxically - seems to be reassuring the City, and sparking some bargain-hunting in the markets.
But Adam Jepsen, founder of Financial Spreads, reckons more market volatility is likely.
“Any investors who think the markets have calmed down should think again. It is far more likely that we are in the eye of the storm,”.
Especially when politicians are still grappling with how to handle the Brexit vote....
The FT is reporting that the Bank of England had a little chat with the bosses of Britain’s largest banks today.
Apparently...
BoE officials gave the bosses of big British banks a supportive message about the amount of liquidity in the system, while pressing them to keep lending to consumers and companies to avoid a repeat of the “credit crunch” that hit after Lehman Brothers failed in 2008, according to a person briefed on the meeting.
Over in Brussels, Greek prime minister Alexis Tsipras is making a new push against Europe’s austerity measures:
This week’s summit was a rare treat for Tsipras; the Brexit issue means it was one of the few gatherings where Greece’s debt crisis wasn’t on everyone’s mind.
The Brexit uncertainty has also driven investors to buy more government debt, as it is a standard ‘safe haven’ during times of crisis.
That forced prices higher, meaning that the yield on 10-year government bonds has hit a fresh record low - at under 0.6%.
That’s a ridiculously cheap level; good news for governments running deficits, but an alarming sign that markets expect little growth and weak inflation for a while.
Chris Giles, the FT’s economics editor, has just published an impassioned plea to Leave campaigner Boris Johnson to stop dithering, for the sake of the country.
He warns that Britain is sinking into recession while the man who helped win the referendum, and who now hopes to become prime minister, wonders what to do next.
Boris Johnson’s Vote Leave lieutenants blame their vanquished foes for the absence of a plan. It sounds like a joke, because it is a sick joke. Officials in government cannot plan what to do next until they have a policy to follow. That is how Britain works, Mr Johnson. Officials advise, politicians decide.
The man who hopes to head the government within weeks has not decided his policy for leaving the EU. He is even less prepared to enter Number 10 than Gordon Brown was. Of course, we all know why Mr Johnson has not stated what sort of Brexit he favours because any choice he makes will be a betrayal.
He could choose to retain membership of the European single market, keeping Britain a member of the European Economic Area while ditching its EU membership. That would betray those with legitimate concerns about immigration, and the xenophobes.
He could prioritise the strict control of movement of people. That would betray his beloved London and the young. Or he could dither and betray the whole country as it sinks into recession.
The time has passed when you can be all things to all people, Mr Johnson. To govern is to choose and your choice is who you betray...
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