London’s FTSE100 staged a dramatic recovery late in the Thursday session to close higher along with small-cap stocks after the Bank of England said it might cut historically low rates even further in the wake of Britain’s surprise Brexit referendum result.
The blue-chip ticker ended up 2.3% at 6,504 – its highest since August 2015. A week ago it was more than 500 points lower in the wake of last Thursday’s EU referendum.
In a sense, it demonstrates how narrow a band the FTSE has gyrated within for the past year.
BoE Governor Mark Carney said in a speech on Thursday that the economic outlook had “deteriorated” due to the UK’s vote to divorce itself from the EU and that “monetary policy easing will likely be required over the summer”. The rate is currently at a 300-year low of 0.5%.
The bourse lapped it up, even if beleaguered sterling continued to fall.
The FTSE AIM 100 Index ended up 1.8% at 3,377, while the FTSE AIM All-Share Index advanced by 1.5% to 707.
A total of 43% of London’s market was higher, 22% lower and 35% unchanged on Thursday.
In spite of new fresh news, Chagala Group (LON:CGLO) ended up 85% at 2.5p to make it the top riser on the day. The top faller was Mongolian oil explorer Petro Madad (LON:MATD), down 52% at 1.625p despite narrowing its 2015 pretax losses and news of a $10mln windfall exit fee from oil giant Shell (LON:RDSB).
In other company news, shares in Esure (LON:ESUR) bounced 8% to 281.6p after a report that the online motor insurer was attracting takeover interest from private equity firms and overseas insurers. The stock closed up 6.3% at 277p.
Buyout groups thought to include KKR, the New York-based investment giant, have been exploring takeover bids for Esure in the last few weeks, Sky News reported.
It comes after Esure said it was considering options for its price comparison website Go Compare, fronted by fictional opera singer Gio Compario.
Midsession
Top-flight shares stayed in the red on Thursday but smaller stocks staged a comeback as investors snapped up bargains.
The FTSE 100 Index fell 7.97 points to 6352.1, dragged down by the likes of Royal Bank of Scotland PLC (LON:RBS), whose shares dropped 11.4 points, or 6.3%, to 168.8p.
Lloyds Banking Group was another of the sector’s big losers, retreating nearly 4% to 53.3p.
But the FTSE 250 jumped 44.69 points to 16,047.59, the FTSE AIM 100 increased 37.94 points to 3355.03 and the FTSE AIM All-Share rose 6.79 points to 704.35.
Analysts said traders were buying into the volatility caused by the EU referendum result, despite the ambiguity about what the outcome would mean for the UK.
Chief investment officer at online investment platform TD Direct Investing, Michelle McGrade, said: “After an uncertain few months where most have been unwilling to take any risks, and sitting on the sidelines, the result has pushed investors into action.”
Property stocks and homebuilders also faced fresh selling pressure amid news that Singapore's UOB suspended its loan programme for London properties due to EU vote risks and uncertainty.
Taylor Wimpey (LON:TW.) backtracked 3.69 points to 128p and Berkeley Group Holdings PLC (LON:BKG) retreated 79p to 2471p.
There was also bad news on the UK economic front, where first quarter GDP growth was unrevised at a quarterly rate of 0.4%, confirming that growth slowed from an upwardly-revised 0.7% in the fourth quarter.
Elsewhere in the top flight, market chatter was circulating that satellite broadcaster Sky PLC (LON:SKY) could face a fresh takeover bid from founder Rupert Murdoch.
Financial advisers to the media tycoon were rumoured to be urging him to take advantage of lower share prices and the weak pound to buy the 61% or so of Sky that he does not already own.
Murdoch backed off from a bid to take over Sky UK in 2011 following the phone-hacking scandal in Britain, which led to the closure of his Sunday tabloid, the News of the World.
A spokesman for Murdoch’s 21st Century Fox (NASDAQ:FOXA) declined to comment. Sky’s shares were 10p down at 843p.
Meanwhile, Murdoch’s publishing arm News Corporation unveiled a £220.3mln recommended takeover bid for Talksport owner Wireless Group, whose shares bounced 67% to 309p.
Among small-cap stocks, Beowulf Mining plc (LON:BEM) advanced 31% to 4.65p on news that the Swedish government had agreed to consider its bid for an exploitation concession for its Kallak North scheme.
Shares in Mosman Oil & Gas Limited (LON:MSMN) rallied 47% to 1.25p on news that HSBC had taken a shareholding of more than 4% in the New Zealand and Australia-focused oil explorer.
US oil explorer Nighthawk Energy plc (LON:HAWK) ticked up 0.22p to 1p after amending its banking deal with the Commonwealth Bank of Australia.
And Akers Biosciences Inc (LON:AKR) was 35p healthier at 205p as it reported success in a clinical trial of its PIFA/chlamydia rapid assay, the first rapid test for chlamydia diagnosis using a finger stick blood sample.
But China New Energy (LON:CNEL), which specialises in engineering and technology for the bioenergy sector, plunged 0.78p to 1.48p after announcing a delay in signing an investment agreement.
Back among blue chips, investment firm 3i Group (LON:III) rose 34p or 6.7% to 538.5p. The group's largest portfolio investment Action continued to grow strongly, it announced today.
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Preview at 6.58am
After four trading days of volatility Thursday looks like respite, with London’s FTSE 100 expected to open only 20 points or so higher.
The relatively small increase isn’t without significance, however, as it moves the blue chip index back above pre-Brexit levels.
Tunnel vision on the FTSE 100 could convince some that everything’s gone back to ‘normal’ already, just days after the historic vote, but, plainly it is not that simple - indeed, down around 0.3% at US$1.3385 this morning the pound is still weaker against the dollar.
Michael Hewson, analyst at CMC Markets, points out that the “stunning turnaround” could end up seeing the benchmark close the higher for the month, but, he also says this would be an outlier.
In a note, he said: “It remains very much an outlier when compared to other stock markets around the world, which means we need to treat it with caution, particularly since the FTSE250 is still 7.5% down over the same period, and US stocks also remain shy of their highs last week.
“Elsewhere in Europe it’s a similar story with the DAX still nursing losses of 6%, while Italian markets have fared far worse, still languishing over 11% lower as concerns about the health of their ailing banks and economy weigh over stock markets.”
On Wall Street, the Dow Jones is about 320 points away from where they were, after closing 284 points or 1.64% higher on Wednesday. The S&P 500 added 1.7% to 2,070, while the Nasdaq rose 1.86% to 4,779.
In Asia, Japan’s Nikkei gained 0.5% to 15,645 while Hong Kong’s Hang Seng advanced 1.7% to 20,786 and the Shanghai Composite was up just a sliver at 2,933.
Australia’s ASX 200 added 1.7% to 5,230.
Brent crude was back above US$50 per barrel after rising 2.9%, while WTI crude futures were up 3.1% to US$49.40.
Gold, meanwhile, was priced at US$1,316 representing a slight fall.
Looking back to London, spreadbetting and CFD firm IG Markets sees the FTSE 100 some 20 points higher around an hour before the open, calling the index at 6,353 to 6,358.