London stocks wipe out post-Brexit losses as fears ease

NEW YORK — US stocks joined a European rally for a second straight day Wednesday (June 29) as fears abated about Britain’s vote to exit the European Union and its impact on the global economy.

London share prices surged, wiping clean post-Brexit result losses. London’s benchmark FTSE 100 closed well over three per cent higher and above its level on the June 23 Brexit referendum.

Paris and Frankfurt shares also pulled off strong increases, buoyed by a firmer Wall Street and Asian markets that earlier led the way on hopes that authorities will unveil fresh stimulus to counter the effects of Britain’s bombshell result.

On Wall Street, the broad-based S&P 500 rose 1.7 per cent.

However, analysts warned of possible further market jitters, given the many unknowns about Britain’s path ahead as it handles its exit from the bloc and dealings with EU partners.

“First the panic effect, then the rebound. That’s a well-known mechanism on financial markets,” said Mr Christopher Dembik, an economist at Saxo Banque in Paris.

“But we also know that after the rebound, volatility can re-emerge, and that is the main risk right now,” he said.

‘EYE OF THE STORM’

“The markets aren’t calm, we are in the eye of the storm,” said Mr Adam Jepsen at Financialspreads, adding that “not a single issue” had been resolved.

“I will be surprised if the markets remain calm for more than a day or two,” he said.

Symptomatic of Brexit’s still-uncertain impact, British telecoms giant Vodafone warned that the future of its London-based headquarters was now in doubt.

Dow member General Electric added 2 per cent after US regulators removed its GE Capital from the “too big to fail” designation as a potential risk to the financial system following major asset sales.

Monsanto surged 2.4 per cent as it reported lower profits and sales and said it was “actively” exploring strategic options.

Monsanto chief executive Hugh Grant said he had personally talked with German company Bayer over its US$62 billion (S$83.5 billion) takeover proposal, but that there was no “formal update” on the bid and that he held talks with other unspecified companies on strategic options.

European debt markets showed signs of calming down.

Money flowed out of safe-haven German government bonds into sovereign bonds on the eurozone’s southern periphery, with Spanish and Italian bond yields easing and those in Germany edging higher.

Asia’s gains built on the previous day’s advance, after South Korea unveiled a US$17 billion plan to support its fragile economy and news emerged that Japan was considering a similar move.

Before the Tokyo stock exchange opened, Prime Minister Shinzo Abe, Finance Minister Taro Aso and Bank of Japan chief Haruhiko Kuroda held talks on containing the Brexit crisis.

Japan’s Nikkei ended 1.6 per cent higher, Shanghai gained 0.7 per cent and Hong Kong finished up 1.3 per cent. AFP