World stocks rose for a third day although bond yields remained subdued, reflecting concerns about the global economy and expectations for more stimulus from central banks, as the Bank of England raised the prospect of more bond buying.
Markets have regained their poise after a short bout of volatility following Britain’s vote last week to leave the European Union, but concerns remain about the longer term economic outlook and the potential for renewed turbulence.
Sterling reversed early gains as Bank of England governor Mark Carney said the central bank would probably need to pump more stimulus into Britain’s economy. Investors largely expect the Bank to cut interest rates over the summer and ramp up its bond-buying programme. The news sent UK shares surging. .
The equity rebound of the last three days was not enough, however, to completely offset losses suffered in recent days which have put global stocks on track for their worst monthly performance since January, down 1.6 per cent for the month.
Renewed concerns over global growth and oversupply have also forced oil prices down again as both Brent and US crude traded below $50 per barrel.
Gold, a safe-haven play, edged lower but was on track for its biggest monthly rise since February after posting its biggest daily rise in more than seven years after Britain backed leaving the EU.
The two-day selloff in the aftermath of last week’s vote had wiped more than $3 trillion off the value of global stocks. They have recovered about half of that over the past three sessions.
Wall Street rose and the S&P 500 gained 0.7 per cent, although the drop in oil prices suppressed gains as the index approached all-time highs.
The MSCI All-Country World index was up 0.7 per cent, but is set to end the month down about one per cent, its worst month since a troubled start to the year. It will also be the first time since 2011 that global stocks will have fallen for two successive quarters.
Worries that a weaker Chinese yuan could spark deflation, seen as a key reason for the worst start to the year for global stocks, were reignited yesterday after Reuters reported that China’s central bank was willing to let the currency fall further.
The UK’s FTSE 100, dominated by oil producers that pay out generous dividends and global healthcare and consumer stocks such as AstraZeneca and Unilever, rose 1.7 per cent and has gained 2.1 per cent since Britain voted to leave the EU.
Shares of UK and European banks, a centre of concern since Britain shocked global financial markets last Friday, have been the hardest-hit during the recent selloff and continued to underperform. They fell 0.7 per cent on the day and are down nearly 18 per cent over the last week.
Deutsche Bank fell 2.7 per cent and hit another record low after the bank failed a US stress test.
In currencies, sterling fell 0.7 per cent to $1.3322, putting distance between a 31-year trough of $1.3122 touched on Monday. It has still lost more than six per cent in the quarter.
The euro, another casualty in the days after Brexit, fell 0.3 per cent to $1.1094.
Brent crude fell 0.9 per cent to $50.18 a barrel after jumping more than four per cent overnight.