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FTSE and pound rise as markets rebound Pound slips back as rally fizzles
(about 4 hours later)
Shares on the FTSE 100 index have risen more than 1%, while sterling has recovered slightly from a 31-year low. Sterling has slipped back to near 31-year lows after a wider market recovery earlier helped it make modest gains.
London's blue-chip share index was up 80 points in afternoon trade at 6,544 as the mood among traders brightened. The pound fell 0.1% against the dollar to $1.2919 after having earlier risen above $1.30.
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 gains for sterling - which is still 0.3% higher against the euro - had come in tandem with widespread increases on European stock markets.
"Sterling has recovered this morning in tandem with widespread gains across European stock markets," said Chris Saint of Hargreaves Lansdown. London's FTSE 100 share index rose more than 1% on Thursday to 6,534, although trading on Wall Street has been choppy.
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. The FTSE 250 of mid-cap UK firms finished 1.5% higher, while stocks in Paris, Frankfurt and Madrid made modest gains.
In other developments:
Rate cutRate cut
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. "Europe's markets have enjoyed a much better time of it today with the FTSE 100 once again outperforming due to a rebound in some of the bigger fallers over the past few days," said Michael Hewson of CMC Markets.
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. Banks and building stocks, which have been hit hard by the EU referendum result, were among the big winners on the FTSE.
Analysts also pointed to strong economic data from the US on Wednesday and expectations that interest rates would remain low in the coming months. Provident Financial rose 8% and RBS gained 6.5%, while house builder Taylor Wimpey shares increased 5.4%.
In the UK, financial markets are now pricing in a 78% chance that the Bank of England will cut interest rates next week.
Bank fearsBank 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.
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.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.
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.
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 other developments:
RetailRetail
In a busy company announcement session, shares in Marks and Spencer were down 0.9% after it reported a steep fall in sales. In a busy company announcement session, shares in Marks and Spencer finished 1.6% higher, having earlier been among the biggest fallers 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. AB Foods, owners of Primark, saw shares rise 8.9% 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 2.1% despite bad publicity about the retailer's working conditions prompting a heavy fall in annual profits. Sports Direct shares rose 1.8% despite bad publicity about the retailer's working conditions prompting a heavy fall in annual profits.
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.