Stocks rose worldwide for the first time in three days and sterling, and the euro climbed yesterday as investors made a rush for Brexit-bashed assets.
Bargain-hunting prevailed, but there was still widespread uncertainty over Britain’s vote to leave the European Union as the bloc’s leaders, including soon-to-be-ex-UK-Prime-Minister David Cameron, held their first post-vote meeting in Brussels.
European shares were up 2.3 per cent, clawing back some of their 10 per cent loss in the wake of the vote in favour of Brexit on Friday.
Wall Street shares also bounced back, with banking shares recovering some of what they had lost. The S&P financial index rose more than 1.55 per cent.
The Dow Jones industrial average rose 138.5 points, or 0.81 per cent, to 17,278.74, the S&P 500 gained 20.29 points, or 1.01 per cent, to 2,020.83, and the Nasdaq Composite added 67.55 points, or 1.47 per cent, to 4,661.99.
Britain’s Lloyds and Barclays jumped 6.8 and four per cent, respectively. Italy’s Unicredit was up three per cent, and Spain’s Bankia surged 8.89 per cent.
Sterling also got a reprieve. Up 1.1 per cent against the greenback at $1.3371, it regained some ground after hitting a 31-year low of $1.3122 on Monday.
The euro was last up 0.4 per cent against the dollar at $1.1068 after hitting a three-and-a-half-month low of $1.0909 on Friday.
Against the yen, sterling rose 1.55 per cent to 136.85 .
Even so, the lack of clarity over how a British exit from the EU will proceed could fuel volatility in the weeks to come.
The major concern for investors – aside from the political ramifications – is whether already struggling banks can survive if Brexit prompts central banks in Europe, Switzerland, Scandinavia and Japan to cut interest rates even more deeply into negative territory.
Safe-haven assets gold and US Treasuries stepped back after two heady days. Spot gold fell one per cent at $1,311.61 an ounce at 1355 GMT yesterday.
Oil prices regained ground, rising two per cent, while investors refocused on potential supply outages and drawdowns in crude. A looming strike at several Norwegian oil and gas fields that threatened to cut output in western Europe’s biggest producer helped support crude futures.
Brent crude futures were up 2.1 per cent, or $1, at $48.16 per barrel. US crude rose 2.3 per cent, or 1.10, to $47.43.
Risk appetite was also beginning to resurface in bond markets. Benchmark 10-year US Treasury notes were 5/32 lower in price, yielding 1.477 per cent, up nearly two basis points from late Monday.
But concerns about sluggish economic growth countered some of the relief from the stock market recovery, leaving Treasury prices mostly flat.