Abu Dhabi: European equity indices surged on Tuesday, rebounding from the losses seen in the past two trade sessions after Britain’s vote to leave the European Union.
London’s FTSE 100 index jumped 135 points in the first 10 minutes of trade alone, and was up 2.83 per cent at 5.20pm (UAE time), while the FTSE 250 index, which is more UK-centric, jumped 3.2 per cent (or 478 points).
Similarly, Germany’s DAX was up 2.6 per cent, as France’s CAC 40 advanced 2.95 per cent, and Italy’s benchmark rose 4.02 per cent.
The rise in European stocks comes after considerable losses on Friday and Monday when panic gripped investors who rushed to sell banking and aviation stocks particularly sending them down in the near 20-per cent ranges.
The sterling also advanced on Tuesday to a high of $1.3419, and was up 1.1 per cent at 5.20pm (UAE time).
Analysts attributed the rebound both in equities and currency to bargain hunters who are now finding relatively attractive prices especially on the beaten down assets.
Fundamentally, the rebound is unjustifiable, though, as the UK still faces plenty of uncertainty both on the political and economic fronts, with the Bank of America Merrill Lynch saying the Brexit will “likely trigger a recession in the UK.”
The bearish comment echoes many similar ones that said the crash in markets on Friday and Sunday was just the tip of the iceberg.
“It seems there’s very little news to support [the sterling] at the moment, and David Cameron’s proposal yesterday not to trigger Article 50 will only lead to a prolonged period of uncertainty, exposing the pound to more downside risk.
I would say another 5-10 per cent drop from current levels can’t be ruled out in the next couple of weeks,” said Hussein Sayed, chief market strategist at FXTM.
In the US, equity futures climbed around 1.2 per cent, signalling that the S&P 500 index may rise for the first time since Friday’s Brexit vote. The index ended trade on Monday with a 1.81 per cent decline.
Meanwhile, in Asia, equity indices ended less than one per cent up or down as investors speculated that central banks may move to ease market turmoil as Shinzo Abe, Japan’s Prime Minister, said Japan will be monitoring markets closely.
