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FTSE 100 closes above Brexit crisis levels

Published: 17:44 29 Jun 2016 BST

City-of-London---skyline

London’s FTSE 100 index on Wednesday closed above “Brexit” crisis levels for the first time since the morning of the In-Out European Union referendum polling last Thursday.

In a solid finish - and one of the best percentage gains of the year so far - the blue-chip ticker ended up 3.6% at 6,360.

However, analysts cautioned that the spoils of that success have not been evenly distributed.

“The performance of the overall index camouflages the very divergent fortunes of the stocks within it,” said Laith Khalaf, senior analyst at broker Hargreaves Lansdown.

“Since last Thursday, around a third of FTSE 100 stocks have lost more than 10% of their value. Around two thirds are in negative territory, and around one in seven have lost more than 20%,” he added.

But counterbalancing that he also highlighted that around a third of FTSE 100 stocks have risen in price terms since last Thursday, yet with only a handful rising by more than 10%.

“What these stocks lack in number and price movement however, they make up for in size, accounting as they do for around 60% of the FTSE 100 by market capitalisation. They include big hitters like Shell (LON:RDSB), BP (LON:BP), British American Tobacco (LON:BATS), Diageo (LON:DGE), AstraZeneca (LON:AZN), and GlaxoSmithKline (LON:GSK),” Khalaf said.

The FTSE 250 has also bounced considerably, but hasn’t recovered to the same extent, and stands around 8% down on its closing price last Thursday.

Although smaller, the gains of small-cap stocks were not to be scoffed at either. The FTSE AIM 100 Index rose 1.4% to 3,317, while the FTSE AIM All-Share Index rose by 1.3% to 697.

A total of 51% of London stocks gained on the day, 15% lost and 34% were unchanged.

The top gainer was India Cap (LON:IGCS) which rose 47.8% to 4.25p while the top faller was industrial maintenance service provider Brammer (LON:BRAM), down 56.2% to 62.5p after the company issued a profit warning and said it may scrap its interim dividend.

Other analysts raised alarms about the shenanigans of what passes for a typical day in European politics, now undermining the potential for a quick and smooth post-Brexit transition. Not only British prevarication invoking the trigger for Brexit talks with Europe, but also discussions in Europe.

“Putting to one side the pantomime taking place in Brussels today as EU leaders laid out their common stance on next steps with respect to article 50, and the UK’s use of it, we’ve also seen EU Commission President Jean-Claude Juncker’s attempts at mischief making by meeting Scottish First Minister Nicola Sturgeon,” said Michael Hewson, chief market analyst at CMC Markets UK in a late day note.

“This appears to have opened up a veritable hornets nest in Spain with respect to the secession ambitions of Catalonia; however equity markets have looked past the Pandora’s box of politics and have continued to move higher.”


Midsession

Brexit, what Brexit? FTSE 100 was powering north at lunch, as traders brushed fears aside as London markets and Euro stocks went higher.

The  index of UK leading shares is up 2.18% or over 138 points at the time  of writing, at 6,277 - just a few points shy of the level it closed last Thursday night  - at 6,338.

Housebuilders were recovering, with Taylor Wimpey PLC (LON:TW.) up 2.87%, in a sector, which has been badly hit  and insurer Prudential (LON:PRU)  was top dog, up 6.22% to 1,264p as financial stocks see opportuinities, post any Brexit.

The rally is being driven by traders looking for bargains as share prices around the world have tumbled.

Electricals and mobile phone retailer Dixon Carphone (LON:DC.) was among the big losers, down 2.11% to 334.8p, despite it shrugging off last week’s Brexit vote, saying it would mean more opportunities in both Europe and the UK.

In small caps a big riser was Nostra Oil and Gas Company (LON:NTOG), up over 27%  as it stuck a deal worth US$2.1mln to sell its 20% stake in the Chisholm Trail Prospect, Oklahoma.

The buyer is a privately owned, Oklahoma based oil and gas group.


OPEN

As the FTSE 100 rose over 100 points on Wednesday investors may be forgiven for wondering what the all the fuss has been about.

Standing at 6,248 the blue chip index was up 1.72% and was within 20 points of the last close before the Brexit result was known.

Wednesday’s rally was driven partially by house builders, one of the worst hit sectors after the vote, with Persimmon (LON:PSN)m Taylor Wimpey (LON:TW.) and Barratt Developments (LON:BDEV) among the better performers.

Other top risers in the FTSE 100 included insurance and financial services groups Prudential (LON:PRU) and Aviva (LON:AV.), up 5.4% and 3.8% respectively.

Travel and holiday group TUI (LON:TUI) and BA owner International Consolidated Airlines (LON:IAG) remained in the fallers column, falling 3.4% and 2.8% respectively, in the wake of the terrorist attack at Istanbul’s Atatürk international airport.

Elsewhere, the FTSE 250 rallied 1.2% to 15,691.

Nobody is pretending the past few sessions of volatility didn’t happen, but a degree of pragmatism and patience appears to have emerged and that has helped stocks rebound.

Ian Williams, analyst at Peel Hunt, has pointed out that when markets opened on Tuesday, after two days of heavy falls, many indices showed signs of ‘extreme oversoldness’.

For example, he says some 38% of the FTSE All Share index had started the day at 52-week lows, which according to Williams is the highest such concentration since November 2008.

“A snapback rally, after two days of violent markdowns, was not the biggest surprise; nobody will be confident that a short-term bottom has established yet, and it is worth remembering that, following that 2008 extreme, the low did not arrive until March 2009,” the analyst said in a note.

“The political outlook in the UK and Eurozone remains uncertain and volatility is likely to persist.”

The fact that nothing has really happened yet, as far as stepping out of Europe is concerned. Until Article 50 is triggered, in the coming months, the terms of Britain’s exit won’t be known nor will it be clear what Britain’s future relationship with Europe will look like.

Credit ratings have been downgraded and the political landscape decimated, but, at the same time the Bank of England vowed to prop up the economy (with £250bn of liquidity promised).

Investor concerns are being deferred, according to Michael Hewson, analyst at CMC Markets, who says the status quo is unlikely to change any time soon.

He added that the extra time - as the government appoints a new Prime Minister before triggering the exit negotiations - may see some of the temperature taken out of what remains a tense situation.

“Whilst that doesn’t remove the uncertainty with respect to the eventual outcome it also means that markets are going to have plenty of time to settle into their new found reality and equilibrium,” he said in a note.

FTSE 100 opening snapshot - 8:15am

The FTSE 100 opened at 6,221, up 80 points or just over 1%.

The top winner was Berkeley Group Holdings (LON:BKG), up 95p or 4% to 2,470p.

The biggest loser was Whitbread (LON:WTB), down 43p or 1.3% to 3,348p.

Preview at 6.49am

London’s FTSE 100 is expected to open positively again on Wednesday, marking a two-day rebound after the panic caused by last week’s Brexit vote.

Worries over the Britain’s exit from the European Union are being deferred by the market, according to Michael Hewson, analyst at CMC Markets, who highlights that there’s no likelihood of Article 50 of the Lisbon Treaty (the mechanism to leave) anytime soon.

In the immediate term the status quo is unlikely to change, he added.

“Whilst that doesn’t remove the uncertainty with respect to the eventual outcome it also means that markets are going to have plenty of time to settle into their new found reality and equilibrium, as the extra time allotted could well see cooler heads prevail as some of the temperature is taken out of what still remains quite a tense situation,” Hewson said in a note.

Wall Street closed Tuesday’s session sharply higher. The Dow Jones ended some 269 points, 1.57%, higher for the day at 17,409. The S&P 500 added 1.78% to 2,036 and the Nasdaq gained 2.12% to 4,691.

In Asia, Japan’s Nikkei advanced 1.9% to 15,615. Hong Kong’s Hang Seng rose by around 0.6% to 20,290 and the Shanghai Composite notched up 0.48% to 2,926.

Australia’s ASX 200 climbed 0.8% to 5,146.

In commodities, crude oil prices began closing the gap back towards US$50. Brent crude gained 3.3% to US$48.77 and WTI was up 3.7% to US$48.13 per barrel.

Gold was priced at US$1,319 per ounce, up 0.3%.

Spreadbetting and CFD group IG Markets sees London’s FTSE 100 more than 1% higher, rising 71 points, as around an hour before the open it calls the index at 6,196 to 6,201.

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