Global markets stage Brexit recovery

Source: News Corp Australia Network:

June 29, 2016 at 20:52

But volatility was expected to continue in the coming weeks given the uncertainty surrounding Britain’s exit from the EU, Mr Daghlian said.

Britain’s key stock index has recovered all of its losses since Thursday’s shock Brexit vote, US stocks are halfway there, and even the battered pound has begun to rebound.
In London, the FTSE 100 index closed at its highest level since April on Wednesday, rising 3.6 per cent to 6360.06 points — over last Thursday’s close of 6338.10.
The index had slumped as much as 8.7 per cent following the vote to leave the EU, which caused the pound to plunge.

Its large weighting in dollar-earning companies and firms with international exposure shielded it from the worst of the post-referendum sell-off.
The mid-cap FTSE 250 remains down nearly 8 per cent since last Thursday and the pan-European STOXX Europe 600 is down nearly 6 per cent.

In the US, investors piled back into banks and other financial companies, with the second day of gains pushing both the Dow Jones industrial average and the Standard & Poor’s 500 index slightly positive for the year.

The Dow gained 284.96 points, or 1.6 per cent, to 17,694.68. The S&P 500 index rose 34.68 points, or 1.7 per cent, to 2070. The Nasdaq composite added 87.38 points, or 1.9 per cent, to 4779.25. European stock indexes posted gains that eclipsed Wall Street’s for the second day in a row.

The gains over Tuesday and Wednesday erased more than half of the losses US markets suffered in the two-day slide that kicked off on Friday.

Other major markets in Europe and Asia have yet to bounce back fully. Markets in France, Germany, Japan and Hong Kong have gotten back about half the ground they lost, while Brazil’s has recouped about three-quarters.

In Australia, bargain-seeking investors lifted the share market on Wednesday. The benchmark S&P/ASX 200 index rose 0.77 per cent, led by financial, mining and energy stocks, mirroring gains made on markets in the UK, Europe and US.

Commsec market analyst Steven Daghlian said 10 of the 12 sectors on the local market made gains.
Australian companies with UK operations, including BT Investment and Henderson, recovered some of their recent losses, Mr Daghlian said.

“The Aussie market has been quite resilient compared to the US markets, the UK and in particularly Europe, where the losses have been most substantial,” he said.
But volatility was expected to continue in the coming weeks given the uncertainty surrounding Britain’s exit from the EU, Mr Daghlian said.

Investment bank Macquarie Group was the biggest gainer among the nation’s 20 largest companies, adding 74 cents to $68.65.
ANZ jumped 31 cents to $23.60, Westpac gained 28 cents to $28.80, Commonwealth Bank added 36 cents to $73.46 and National Australia Bank was 11 cents stronger at $24.74.

BT added 43 cents to $8.12 while Henderson gained two cents to $3.72.

Mining giant Rio Tinto jumped 63 cents to $44.83 and BHP Billiton gained 27 cents to $18.30.
The resources sector was boosted by oil price gains on possibly supply outages and drawdowns in crude. But bucking the broader market were gold miners, as gold prices fell as investors sought out bargains on equity markets.

Newcrest Mining slipped four cents to $23.51 and Evolution Mining fell six cents to $2.38.
In currency markets, the British pound recovered some of its losses this week but remained near its 31-year low. It rose to $US1.3431 from $US1.3343 on Tuesday.
In London, TJM Partners head of trading Manoj Ladwa said the blue-chip stocks were diverse, with decent global exposure.

“Some of the banks and travel stocks have taken a pounding, but we’ve seen a big switch into sectors and stocks which are predicted to outperform, with oil companies back in vogue,” he said.

Despite the recent rally, the FTSE 100 remains down 9 per cent in US dollar terms.
Energy shares added 40 points to the index’s rise, the biggest contribution by a sector, as oil prices jumped after the US government reported a larger-than-expected weekly withdrawal from crude inventories.

Oil companies earn dollars, and other companies that get much of their revenue in dollars but report earning in pounds, such as drugmakers, have benefited as the pound slump to a 31-year low. Other defensive stocks that do well in times of economic uncertainty are also popular among analysts.
GlasxoSmithKline is up 13 per cent since its Friday low, and AstraZeneca is up 17.5 per cent.

Gains were broadbased, however, with only three stocks in negative territory and sectors that are sensitive to economic performance also rising.
Bank stocks were among those that stabilised, on expectations the Brexit process might not start anytime soon.
Financial services, which had slumped, were among the top gainers.

Britain’s outgoing Prime Minister David Cameron said he had not faced overwhelming pressure to invoke Article 50 of the EU’s Lisbon Treaty, which would set in motion a British departure from the bloc, despite some public statements to the contrary.

The UK banking index rose 2.5 per cent and the life insurance index gained 5.5 per cent. Mining stocks climbed 4.6 per cent, tracking a rise in metals prices.
However, banks are still down around 12 per cent since the referendum.

“Traders are focusing on a more positive side and they pounce on the opportunities which have arisen from the recent sell-off and try to bag some bargains,” said Naeem Aslam, chief analyst at TF Global Markets.