Emerging from two days of global gloom, the US markets are solidly higher today as investors have shaken off the Brexit hangover, and welcomed encouraging data on both the economy and housing. The rebound comes after even bigger gains during earlier European sessions as global markets recovered from a two-day rout prompted by Britain’s vote to leave the European Union.
By Paolo Palazzi-Xirinachs
Tuesday, June 28, 2016
Shares of energy and health care companies have led the rally. Consumer and technology stocks also recorded gains. Shares of banks and other financial companies, which took the heaviest losses in the Brexit sell-off rose, and energy stocks headed higher as the price of crude oil also rose. Bond prices fell, sending yields higher. Near 1PM EST, the Dow Jones industrial average was up 0.91%, and the S&P 500 index was up 1.1%. The Nasdaq composite index gained 1.57%.
Uncertainty and anxiety over the economic fallout from the Brexit vote had upended global financial markets since Friday and prompted ratings agencies to slash their top-shelf credit rating for Britain. However, selling pressure seems to be easing as Prime Minister David Cameron of Britain, who has signaled he might not set off a clause setting in motion the country’s exit from the European Union, was expected to discuss the situation with his European Union counterparts on Tuesday.
Aside from the Brexit drama, a report today showed the US economy expanded more than previously projected in the first quarter. Consumer confidence increased in June for the first time in three months, according to a report from the New York-based Conference Board, and that helped put traders in a buying mood. Separately, a crucial gauge of home values showed that home prices climbed in April, reaching highs in several cities.
In European markets, the German DAX gained 1.9%, and in France, the CAC 40 rose 2.6%. The FTSE 100 was up 2.6% in Britain. The pound strengthened by 0.9% to $1.3347, supported by technical indicators that suggested the record two-day loss since Thursday’s vote was excessive. The move comes even after the U.K. was stripped of its top credit grade by S&P Global Ratings. Fitch Ratings also lowered the country’s rank.
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