European Stocks Cap Best Week in a Month in Post-Brexit Recovery

  • Optimism over policy support pushes shares toward weekly rise
  • Euro-area June manufacturing grew faster than initial forecast

FTSE 100 Leads European Stocks in Post-Brexit Gains

European stocks strengthened a rally that has recouped more than half the losses from the aftermath of the Brexit vote.

The Stoxx Europe 600 Index added 0.7 percent at the close, capping its biggest weekly gain in a month. The U.K.’s FTSE 100 Index also advanced, completing its best four-day jump since 2008 amid a weakening pound and rising commodities.

After a two-day selloff sparked by Britain’s shock vote to quit the EU, the Stoxx 600 has recovered 7.6 percent, the biggest surge since February, as central banks stepped up to reassure investors they were ready to act. Lenders reversed a drop today after the Bank of England was said to be planning a cut in capital requirements as early as next week. Standard Chartered Plc and UBS Group AG rose more than 2 percent.

“Policy makers have been very level-headed,” said Francois Savary, who helps oversee the equivalent of $2.6 billion as chief investment officer at Prime Partners in Geneva. “It’s all about the relief that central banks have intervened. But this rebound is not part of a new trend. There are still political uncertainties and let’s not forget that we’re in a low-growth environment where corporate profits are struggling.”

Equities extended gains after U.K. Justice Secretary Michael Gove, in the fray to become the next Prime Minister, said he doesn’t expect the formal mechanism for leaving the European Union to be triggered this year. Theresa May, the bookmakers’ favorite for the position, has said the same.

The BOE could loosen policy within months, Governor Mark Carney said yesterday, while the European Central Bank was said to consider loosening the rules for its bond purchases. The Stoxx 600 trimmed its first monthly loss in four and is up 3.2 percent for the week.

Stocks were volatile in the run-up to and the aftermath of the Brexit vote, with trading volume reaching records. A gauge of euro-area equity swings surged to a ten-month high before the referendum, before subsiding to a three-week low. The VStoxx Index fell for a fifth session today.

Euro-area manufacturing grew faster than initially estimated in June, a report with results collected prior to the referendum showed today, while another release showed unemployment in the region fell to an almost five-year low. All 19 industry groups on the Stoxx 600 advanced, with Volkswagen AG and PSA Peugeot Citroen leading carmakers to the best performance.

Among shares active on corporate news, Temenos Group AG climbed 3.1 percent after the Swiss software maker said Standard Chartered will use its wealth management program in more than 30 markets. Telefonica Deutschland Holding AG slid 2.5 percent after Credit Suisse Group AG downgraded the shares to neutral, citing increased competition in Germany.

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