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London’s FTSE bounces back post-Brexit vote and ends above 6,000 level

Published: 17:35 28 Jun 2016 BST

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London’s FTSE 100 index rose on Tuesday and ended above 6,000 points as some calm returned to the bourse after three days of frantic trading in the wake of Britain’s shock referendum decision to quit the European Union.

The blue-chip ticker ended up 2.6%, or 158 points, at 6,140, led by financials, retailers and property stocks.

“The tables turned on the UK stock market today, with a relief rally in cyclical stocks. However it would be premature to call the bottom of the market, prices are still adjusting to the post-Brexit world, and it would be foolhardy to rule out further price swings,” said Laith Khalaf, Senior Analyst, at Hargreaves Lansdown

“The bounce in the Footsie does show there are buyers out there who are swooping in when prices fall sufficiently, but markets neither go up, or down, in a straight line, and things may yet have to get worse before they get better,” he added.

On Friday, it dropped over 400 points, burrowing into 5,900 territory within 30 minutes of opening and absorbing the so-called “Brexit” vote, and then rebounded above 6,000 on Friday, while on Monday it ended below 6,000 for the first time since the June 16 close.

On Tuesday, the London bourse nearly half of stocks gained, 20% lost and 32% were unchanged on the day.

Small-cap stocks also had a good day of it. The FTSE AIM 100 Index closed up 2.6% at 3,270, while the wider FTSE AIM All-Share Index managed a more modest 1.8% gain to 688.

“Valuations on the UK stock market look in the middle of their historical range, which suggests it’s a reasonable time to put money in the market if you are a long term investor. But given the current volatility, you need to be willing to stomach further price falls, if you are dipping a toe in. Indeed it may be worth drip-feeding money into the market to get a smoother ride,” said Khalaf.

Some UK businesses have seen a silver lining for their outlooks following Brexit, while others such as privately-owned luxury carmaker Aston Martin has demanded that Brexit politicians get their act in gear.

 Jet engine maker Rolls-Royce Holding PLC (LON:RR), whose shares rose 17.5p, or 2.7%, to 669.5p, said the decision was not its chosen outcome.

But it said it would not have an immediate impact on its business and the longer-term effect would depend on any new arrangements drawn up between the UK and the EU.

Meanwhile, Next Fifteen Communications Group plc (LON:NFC) said that with 75% of revenues generated in other currencies, mostly the US dollar, it stood to benefit from a weaker pound caused by the UK’s vote to leave the EU.

The impact of any slowdown in the UK and EU would be relatively modest, it said. Its shares ended up 3.4% at 241.50p.

In company news, the top riser was Messaging International (LON:MES), up 46.1% to 0.475p after the company reported a narrowed loss on lower impairments following continued progress of new products such as "Secure Mobile Messaging", with a decline in traditional Text-to-Landline products.

The biggest faller in London was Sepura (LON:SEPU), down 22.2% at 42p. On Monday, the company reported it has raised £65mln in a share placing to strengthen its balance sheet and support its growth strategy, as it reported it swung into loss and warned about the new year.


Midsession

Investors sought bargains following turmoil caused by Britain’s EU referendum as BBA Aviation plc (LON:BBA) flew higher amid bid talk.

The FTSE 100 Index lifted 160 points to 6142 as traders checked into cheap stocks following the vote to leave the EU last Friday.

Commentators, however, were sceptical about whether the bounce signalled a genuine  recovery in confidence, given the uncertainty surrounding Britain’s position in the 28-nation bloc.

Ipek Ozkardeskaya at London Capital Group branded the market performance as "groundless optimism".

“Although the FTSE opened upbeat in London this morning, investors should remember Moody’s, S&P and Fitch have downgraded the UK’s credit rating," Ozkardeskaya said.

“And even if the UK banks are better-bid at the early hours of trading in London, the market is now pricing in the possibility of a Bank of England rate cut.”

Although the market was up, gossips suggested there could be more than meets the eye to a rise in the shares of BBA, which services private jets.

The stock ascended 5.2p, or 2.6%, to 203.2p as chatter resurfaced that a Canadian pension fund manager was thinking of taking a ride with the private jet servicing group.

In March, it was reported that PSP Investments was considering an approach to BBA, which bought Landmark Aviation last year for US$2.1bn – an asset that reportedly interests PSP.

PSP looks after money for the Canadian mounted police, while BBA does flight support for jets at airports in the UK, Italy, the US and elsewhere.

A spokesman for BBA declined to comment.

Financial stocks were staging a fight-back after the turmoil of the last two trading sessions but big-cap miners were off colour.

Gold giant Randgold Resources (LON:RRS) and silver miner Fresnillo (LON:FRES) led the decline after yesterday, when they gained on the gold price surge. Gold fell by 0.6% on Tuesday to US$1,316.1p an ounce.

In small-cap shares, higher was also the direction of travel. The FTSE AIM All-Share added 9.35 points to 686.31, while the FTSE AIM 100 was 65 points to the good, at 3,254.

Some small miners were faring better. Vast Resources PLC (LON:VAST) advanced 21.7% to 0.28p and Chaarat Gold (LON:CGH) lifted almost 12% to 8p.

In company news today, African airline carrier fastjet (LON:FJET) flew nearly 16% lower to 24p as it carried fewer passengers than expected in the half-year and was planning a fund raising.

Chairman Colin Child said trading was tough. Yields picked up as have domestic routes within its main hub of Tanzania, but international services remain difficult.

It carried some 390,000 passengers in the half-year to June (2015: 363,700) but load factors slumped to 47% (2015:70%) as capacity increased.

Elsewhere, Premier Veterinary Group plc (LON:PVG) added over 26% to 167.5p as it inked another major agreement in the US for its preventative healthcare programme for pets, branded as Premier Pet Care Plan (PPCP).

On the winning front, online grocery delivery service Ocado PLC (LON:OCDO) reported higher first-half profits and customer numbers despite a tough market, sending shares 9.2% higher to 227p.

The company revealed pre-tax profits in the 24 weeks to May 15 rose to £8.5mln from £7.2mln a year ago on a 13.9% increase in sales to £582.9mln.
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The FTSE 100 was up 2% or 130 points, ahead of pre-open forecasts at 6,111.

The top winner was Legal & General Group (LON:LGEN), up 7% to 176.5p.

The biggest loser was Fresnillo (LON:FRES), down just 1 point to 14,82p.
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Preview at 7.13am

Investors in London are set for some respite after a shocking few day’s for the English.

As the bleary eyed English reflect on ‘going out of Europe’ twice in a few days (after Iceland’s soccer team knocked the Three Lions out of the UEFA championship) London’s FTSE 100 is expected to begin Tuesday on the front foot after Sterling rallied somewhat.

It comes as the markets ponder just how significant a disruption the Brexit may actually be, for them, and as the Bank of England intends to step in with support when needed some are already suggesting the worse could be avoided.

“The key question is whether the UK referendum vote represents a shock to markets or a potential genuine crisis. The focus then has to be on what would be the circuit breaker,” said Chris Weston, analyst at IG Markets.

“The answer for the latter question would likely come from another co-ordinated central bank response, with shared liquidity through swap lines and easing of monetary policy, with increased forward guidance.

“This is already being priced in, with the swaps markets pricing a 65% chance of easing from the Bank of England this year.”

He added: “Let’s see what the response is, but the risks are building and the fact we seeing buying in select stocks in the UK and elsewhere suggest most in the market feel we are seeing a short-term shock rather than something more protracted and sinister.”

Nevertheless, the volatility of recent days continued to spell negativity in international markets.

Monday saw the Dow Jones shed 260 points, 1.5%, to 17,140 while the S&P 500 gave up 1.8% to 2,000 and the Nasdaq lost 2.4% to 4,594.

In Asia trading was mixed. Japan’s Nikkei edged slightly higher, adding 0.2%, to 15,339 while the Shanghai Composite was flat. Hong Kong’s Hang Seng dipped 0.74% to 20,077.

Australia’s ASX 200 was down 0.66% to 5,103.

In commodity markets, Brent Crude Oil prices gained 1.5% to US$47.90 while America’s WTI contract had risen 1.6% to US$47.10. Gold remains volatile as the ‘safe haven’ asset tracks the overall uncertainty in markets, but this morning stood at US$1,317 per ounce.

In London the FTSE 100 is predicted to start Tuesday’s trading session more than 1% higher, as an hour before the open IG Markets was calling the index up 70 points to 6,049 to 6,051.

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