- FTSE 100 up most since 2011, erases post-vote declines
- Tour operator TUI down after terror attacks in Istanbul
European equities rose for a second day, recovering more of the declines triggered in the immediate aftermath of the U.K.’s decision to leave the European Union.
The Stoxx Europe 600 Index climbed 3.1 percent at the close of trading, with miners and energy producers as the best performers. Friday’s shock vote for British secession sent the benchmark to its worst two-day rout since 2008, before yesterday’s advance. The number of shares changing hands today was 45 percent higher than the 30-day average. The FTSE 100 Index also rallied on increased volume, erasing post-Brexit losses and returning to its highest level since April.
Investors are seeking clarity on the plan for secession with Britain facing political upheaval. Prime Minister David Cameron has said it will be up to his successor, due for appointment in early September, to formally activate the EU exit mechanism. There’s no legal obligation for Britain to do it at all, even though European Commission President Jean-Claude Juncker said the EU would put a time limit on it. Cameron’s rejection of calls for a second vote hasn’t stopped some traders from speculating about the possibility.
“The counter-movement to the heavy losses after the Brexit shock show that perhaps some realism is starting to set back in, or perhaps that there is hope for an adequate solution,” said Thorsten Engelmann, a trader at Equinet Bank in Frankfurt. “We still don’t know whether a new referendum would be an option for the U.K., or whether there’s a way to go around it.”
Meanwhile, investors are watching for any policy action that could assuage market turmoil. The Bank of England and the European Central Bank both stressed the availability of liquidity within hours of the vote results, while bets for a Federal Reserve rate increase have receded further. Traders are pricing in less than even odds of a hike until at least 2018.
European shares have had a wild ride in the run-up to and after the Brexit vote. After rising as much as 8.1 percent from a three-month low on June 14 through the day of the referendum, the Stoxx 600 tumbled 11 percent in the two days that followed. While the gauge has recouped about a third of those losses now, it’s still down 6 percent in June, poised for the worst monthly decline since January.
“Markets don’t want to go much lower until they know what will actually happen," said Heinz-Gerd Sonnenschein, an equity strategist at Postbank in Bonn, Germany. “We’re still in turbulent waters because no one knows what’s coming, but even the U.K.’s exit doesn’t seem to be certain at the moment.”
Platinum producer Anglo American Plc and silver producer Fresnillo Plc jumped more than 8 percent as prices of those metals rallied. Tullow Oil Plc and BP Plc paced an advance in energy shares.
A gauge of Italian banks rallied as much as 4.8 percent amid reports the government in Rome is pursuing a six-month waiver of EU state-aid rules, before giving up most of its gains as Germany was said to oppose any attempt to shield private bank investors from losses.
Among other shares moving on corporate news, GAM Holding AG jumped 12 percent after agreeing to acquire Cantab Capital Partners LLP, a firm that uses mathematical models to decide when and which securities to buy and sell, for $217 million.
Tour operator TUI AG declined 3.8 percent after coordinated terror attacks at Istanbul’s airport.