Leading London-listed shares have recorded their biggest daily rise since October 2011, regaining all their losses and more since the Brexit vote, with nearly £60bn added to the value of Britain’s top 100 companies.
Despite warnings from economists that the UK’s decision to leave the European Union could cause a new recession, the FTSE 100 jumped 3.58% to 6360, taking it above the 6338 level it closed at on Thursday before the polls closed.
Analysts said the initial panic selling had been reversed as investors realised any departure from the EU would not happen for months, given the turmoil in the UK government. In the meantime it was more or less business as usual, they added. Bargain hunters had also come out in force, believing the recent falls had been overdone.
On top of that, there were suggestions that central banks, notably the US Federal Reserve and the Bank of England, might cut interest rates further to fend off any economic downturn.
Chris Beauchamp, senior market analyst at online trader IG, said: “The contrarian nature of markets has never been more apparent than in the past few days. We could all understand the selloff seen on Friday and then again at the beginning of this week, but the storming rally on the FTSE 100, which has seen the index rally over 7% from Monday’s low, is much harder to explain.
“The market has certainly been quite sanguine in its assessment of the situation, noting that, technically, nothing has really changed in the UK’s relationship with the EU, and that even negotiations about negotiations have yet to start.”
He added: “Of all the post-Brexit outcomes discussed across the City over the past few months, ‘buying frenzy’ was not one that was viewed as very likely.”
The buying was spread over most sectors, from companies that earn in dollars which will benefit from the recent falls in sterling, to housebuilders and banks which bore the brunt of the initial selling following the vote.
But dealers pointed out that in dollar terms, the FTSE 100 was still down since Thursday given the decline in the pound, which despite a 1% rise on Wednesday has still fallen from around $1.4 before the referendum to $1.34.
And the FTSE 250, which consists of companies more focused on the UK economy than those in the FTSE 100, has not recouped its post-Brexit losses. Despite a 3.2% rise on Wednesday it is still down 7.6% since the result of the vote.
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