Stocks across Europe are rebounding on Tuesday, bouncing back from the horrible crash witnessed over the last two days of trading since Britain voted to leave the European Union at the end of last week.
Every single major index in Europe witnessed big drops across Friday and Monday, with market boards a sea of red. However, on Tuesday some of the mild panic felt by investors in the past couple of days seems to have dissipated, and equities across Europe are broadly higher. The improvement in sentiment comes despite Britain having its credit rating cut by two ratings agencies overnight.
Around 11:50 a.m. BST (6:50 a.m. ET) the FTSE 100 is higher by 2.44% to pop back above the psychologically significant 6,000 point mark. It should be noted that Britain’s blue-chip index is disproportionately filled with companies that denominate their assets in dollars and as a result are not hugely affected by the massive drop in the pound that has hit since the British exit from the EU, or Brexit. That means that the FTSE has outperformed its continental rivals.
Here is the chart of how the FTSE 100’s bounce looks on Tuesday:
The individual stocks performing best on the day are largely companies with substantial UK operations, a sign that investors in the UK feel that the worst of the market crash may now be over. That is reflected in the minor rise in the pound against the dollar on Tuesday morning. So far on the day, security and outsourcing firm G4S tops the table, up more than 9%, while high street stalwart Next — often seen as a bellwether for consumer activity in general — is up by a similar margin.
Banking stocks, which took an absolute pummelling on Monday, have also rebounded strongly. At the time of writing, Lloyds has jumped 5.5%, Barclays is more than 3% higher, and RBS is also up by around 3%.
At the other end of the tables only a handful of stocks, including gold miners Fresnillo and Randgold Resources, are lower on the day, taking a hit from the fall in gold’s price seen during Asian trade. As gold is seen as a safe haven asset, when investor sentiment grows it tends to fall in price, hitting the stock of companies invested in the metal
The smaller cap FTSE 250 paints a more accurate picture of UK investor sentiment, as the vast majority of firms in the index are wholly UK-based. The index has gained around 3% so far on Tuesday, erasing some of the 7% fall seen on Monday, and suggesting that sentiment as a whole in the UK market is returning somewhat. Here is how the FTSE 250 looked at the close:
Benchmark indexes in all of Europe’s major economies are also jumping on Tuesday. Here is the scoreboard:
Commenting on the movements in stocks on Tuesday morning, Mike van Dulken of Accendo Markets said that stocks are: “Well off Friday’s worst levels and having registered a breakout beyond short-term falling highs resistance, markets appear to have calmed into 6000: the mid-point of pre and post-Brexit best and worst. Bulls are looking for a break above yesterday’s 6130 highs to keep recovery alive.”
The gain “comes in spite of a mixed Asian session and negative US close after ratings agencies S&P and Fitch joined Moody’s in downgrading the UK’s credit rating post Brexit,” van Dulken added in his morning email to clients.