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Shares rise as 'hard-hit' stocks rally FTSE and pound rise as markets rebound
(about 1 hour later)
Shares in London have risen about 1%, while sterling has recovered slightly from a 31-year low. Shares on the FTSE 100 index have risen more than 1%, while sterling has recovered slightly from a 31-year low.
The FTSE 100 share index was up 63 points shortly after midday at 6,526.46. London's blue-chip share index was up 80 points in afternoon trade at 6,544 as the mood among traders brightened.
The pound rose 0.7% against the dollar to go back above $1.30 and was 0.9% higher against the euro at €1.1754.The pound rose 0.7% against the dollar to go back above $1.30 and was 0.9% higher against the euro at €1.1754.
Property shares, which have been among the worst hit since the Brexit result, led the FTSE 100 higher after figures showed house prices increased in June. "Sterling has recovered this morning in tandem with widespread gains across European stock markets," said Chris Saint of Hargreaves Lansdown.
After three days of declines, the recovery is "being led by a rebound in the sectors that have been hit the hardest over the past few days", said Michael Hewson of CMC Markets. The FTSE 250 of mid-cap UK firms was 1.3% higher, while stocks in Paris, Frankfurt and Madrid recovered some of their losses from Wednesday.
Rate cutRate cut
House builders Taylor Wimpey and Persimmon were two of the biggest winners on the FTSE on Thursday morning. Their shares increased 7% and 6% respectively, but are still more than 30% lower since the referendum. The recovery is "being led by a rebound in the sectors that have been hit the hardest over the past few days", said Michael Hewson of CMC Markets.
Analysts also pointed to strong economic data from the US on Wednesday and expectations that interest rates will remain low in the coming months. Major UK house builders, Taylor Wimpey and Persimmon, were among the big FTSE winners on Thursday morning, before falling back to gains of around 4%. Their shares are still more than 30% lower since the EU referendum result.
"Following on from Mark Carney's strong hint last week that rates will be cut this summer, financial markets are now pricing in a 78% chance that this will happen next Thursday," said Ben Brettell, a senior economist at Hargreaves Lansdown. Analysts also pointed to strong economic data from the US on Wednesday and expectations that interest rates would remain low in the coming months.
On edge In the UK, financial markets are now pricing in a 78% chance that the Bank of England will cut interest rates next week.
Despite a sharp sell-off after the Brexit vote, the FTSE 100 is up more than 3% since its close on 23 June. However, it is down around 10% in dollar terms as the slump in sterling to a 31-year low has reduced the dollar value of the market. Bank fears
Sterling has fallen 13% from the high of $1.50 seen before the referendum result - when investors bet heavily on a win for Remain - to lows not seen since 1985.Sterling has fallen 13% from the high of $1.50 seen before the referendum result - when investors bet heavily on a win for Remain - to lows not seen since 1985.
Despite a sharp sell-off after the Brexit vote, the FTSE 100 is up more than 3% since its close on 23 June. However, it is down around 10% in dollar terms as the slump in sterling has reduced the dollar value of the market.
While there were some tentative signs of recovery in riskier assets on Thursday, investors were still on edge over the fallout from the Brexit vote which helped extend a rally in gold prices.While there were some tentative signs of recovery in riskier assets on Thursday, investors were still on edge over the fallout from the Brexit vote which helped extend a rally in gold prices.
The precious metal is trading near its highest price in more than two years. Gold tends to perform well when investors are worried about the performance of riskier assets like equities.The precious metal is trading near its highest price in more than two years. Gold tends to perform well when investors are worried about the performance of riskier assets like equities.
In a busy company announcement session, shares in Marks and Spencer were down 1.0% after it reported a steep fall in sales. In other developments:
AB Foods, owners of Primark, saw shares rise 8.5% to be the biggest gainer on the FTSE. Retail
In a busy company announcement session, shares in Marks and Spencer were down 0.9% after it reported a steep fall in sales.
AB Foods, owners of Primark, saw shares rise 9.3% to be the biggest gainer on the FTSE.
The firm said it was sticking to plans to expand its Primark chain across Europe and the US, and was optimistic about continued growth despite uncertainty created by the Brexit vote.The firm said it was sticking to plans to expand its Primark chain across Europe and the US, and was optimistic about continued growth despite uncertainty created by the Brexit vote.
Sports Direct shares rose 4.2% despite bad publicity about the retailer's working conditions prompting a heavy fall in annual profits. Sports Direct shares rose 2.1% despite bad publicity about the retailer's working conditions prompting a heavy fall in annual profits.
In early trading it was among the top gainers on Britain's FTSE 250 index of mid-cap companies, which increased 1.4% to 15,886.16 points.
Fed cautiousFed cautious
Late on Wednesday, the latest Federal Reserve minutes were released, showing that prospects of an interest rate hike have diminished.Late on Wednesday, the latest Federal Reserve minutes were released, showing that prospects of an interest rate hike have diminished.
This soothed investors who had feared that a rise in interest rates may hinder prospects for economic growth.This soothed investors who had feared that a rise in interest rates may hinder prospects for economic growth.
The US central bank's last meeting in June took place before the UK's EU referendum.The US central bank's last meeting in June took place before the UK's EU referendum.
However, policymakers were concerned the vote would heighten global market uncertainty and potentially hurt the US economic outlook.However, policymakers were concerned the vote would heighten global market uncertainty and potentially hurt the US economic outlook.