Astounding post-Brexit recovery for firms as FTSE 100 index of blue chip firms closes on two-month high
It has now clawed back the the £85billion losses it suffered in just two days
BRITAIN’S biggest companies completed a remarkable post-Brexit recovery last night and closed on a two-month high.
The FTSE 100 index of blue chip firms surged by 3.6 per cent, rising 220 points to 6360.
Its rally took it above its recent high of last Thursday evening, when it was not yet known that the UK had voted to leave the EU.
It has now clawed back the £85billion losses it suffered last Friday and on Monday in just two days.
Sterling remains way down on the dollar, but it too is showing signs of recovery, with £1 last night worth nearly $1.35 against its low of $1.30.
Business leaders, even those in the Remain camp, rallied round yesterday to say the UK had a strong future in a post-Brexit world.
Oil prices also edged back towards $50 a barrel, a further sign of market confidence. But it remains to be seen if the surge will continue, with more volatility expected in coming weeks and months.
He said: “Even negotiations about negotiations have yet to start.”
Tony Cross, analyst of Trustnet Direct, said “the post-Brexit rebound continues”.
He said: “Markets have certainly bounced back well from the shock of Brexit, but there’s still an awful lot that needs to be ironed out.
“However investors who sat tight should be feeling somewhat happier.”
Housebuilders Persimmon and Taylor Wimpey clawed back ground lost in the sell-off, rising 7.4 per cent and 8.9 per cent respectively.
Insurers Aviva, up seven per cent, and Prudential, 5.5 per cent, also joined the biggest blue chip risers.
CMC Markets’ chief market analyst Michael Hewson said: “With no likelihood of Article 50 of the Lisbon Treaty being triggered any time soon, it seems the status quo isn’t likely to change in the short term.
“While that doesn’t remove the uncertainty with respect to the eventual outcome, it also means markets will have plenty of time to settle into their newfound reality.”
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Many FTSE 100 members do their business abroad and deal in dollars.
The FTSE 250 index of smaller companies, which is more exposed to the UK economy, is still down on last Thursday. It did, however, rally yesterday, climbing 3.22 per cent.
Some uncertainties from last Friday morning are slowly disappearing, with a succession plan of sorts in place for PM David Cameron.
Bank of England Governor Mark Carney has also pledged to provide up to £250billion in cash to stabilise the markets if needed.
Dixons Carphone chief exec Seb James said: “Despite the volatility that is the inevitable consequence of such change, we expect to find opportunities for additional growth.”
Peter Hargreaves, founder of financial firm Hargreaves Lansdown, a Brexit campaigner, said leaving the EU will benefit business.
He said the falling Pound, which will help exporters, could be a big boost for top UK-listed companies.
The tycoon said: “It will be the biggest stimulus for British business that I’ve seen since 1992. It’s going to make them very profitable.”
Despite fears a string of companies would leave the UK, none have yet confirmed their departure.
Fuel
FUEL could go up in the short term due to the weaker Pound.
It is priced and sold in US dollars, meaning it is more expensive than it was last week.
Food prices could also rise as around 40 per cent of produce comes from abroad and we pay for it in dollars and euros.
The Pound remains weak against the dollar at $1.35. It was $1.50 late last Thursday.
Consumers also won’t get as much for their Pound if they holiday in the US or eurozone.
Pensions
PRIVATE pensions are unlikely to be significantly affected long-term — particularly if stock markets continue to rise.
Hargreaves Lansdown pensions expert Tom McPhail said: “For long-term pension investors who may be seeing the value of their retirement savings falling today, the key message is do nothing unless you have to.
“If you’re years off retirement making regular savings, keep going. Market falls mean buying investments at a lower price.”
Taxes
CHANCELLOR George Osborne has already made a U-turn on his emergency budget threat.
It was feared there would be a two per cent rise in basic rate tax, and a three per cent hike for higher-rate payers.
He also warned about cuts to the NHS and education. But he declared on Monday he would not now hold a snap budget.
He said such a move would have to wait until the autumn when there will be a new PM, and maybe a new Chancellor.
Housing
THE housing market remains healthy, despite fears Brexit would trigger 20 per cent falls.
Builder Redrow said in a trading update: “There is a long-term underlying demand for new homes following decades of under supply. This chronic shortage of housing leaves market fundamentals unchanged.”
Figures from lender Nationwide released yesterday showed the average UK house rose to nearly £205,000 this month — up 5.1 per cent on a year ago.
Interest
INTEREST rates could now fall below their historic low of 0.5 per cent — meaning cheaper mortgages for millions of Brits.
The UK market was this week giving a 50 per cent chance of an interest rate cut next month.
It was also factoring in a 65 per cent chance of a cut by August and an 80 per cent chance by the end of the year.
The market is even pricing in a 15 per cent chance of UK interest rates turning negative over the course of the next year.