Wall Street Claws Back at Brexit Losses on Possible BOE Intervention
Wall Street rose in early afternoon trading on Thursday after Bank of England Governor Mark Carney raised the prospect of an interest rate cut following Britain's vote to leave the European Union. Carney's comments added more steam to a recovery rally after a two-day post-Brexit carnage that erased about $3 trillion from global markets. The three major US indices - all up about 1% - have now recouped more than three-quarters of the losses suffered after the vote.
By Paolo Palazzi-Xirinachs
Thursday, June 30, 2016 - 00:00
Carney said monetary policy easing would likely be required over the summer and that the BOE had measures in place to prop up the country's economy and its vast banking sector. Investors will now keenly watch St. Louis Fed President James Bullard's speech on US monetary policy outlook for clues on the Fed's take on policy easing. Bullard is scheduled to speak in London at 3:15 PM EST.
Last week, Britain voted in a referendum to leave the European Union, sending stocks and the pound reeling. Britain’s stock market has recouped its losses, though that is largely thanks to the pound’s drop, which helps big British companies’ overseas earnings. Other indices of companies more focused on the British economy were still down sharply. Globally, however, the worries are shifting from short-term turmoil to longer-term risks, analysts say.
US bank stocks rose broadly after getting clearance from the Federal Reserve to raise their dividends and buy back shares. Many of them announced plans to do so immediately after the Fed’s announcement late Wednesday. Shares of Lionsgate Entertainment, which owns the “Orange Is the New Black” Netflix series, rose 10% after the company said it would buy the cable channel Starz.
In other global economic news, Germany, the DAX edged slightly higher and in France, the CAC 40 gained 0.4%. The FTSE 100 was up 0.2%, helped by the pound’s 10% drop since last week. The Nikkei 225 edged up 0.1% in Japan, while in Hong Kong, the Hang Seng gained 1.5%. The Shanghai composite index inched down 0.1% in China. The Kospi was up 0.7% in South Korea. In Australia, the S&P/ASX 200 rose 1.8%.
The yen, seen as a safe haven currency, strengthened sharply after the British referendum, but the volatility has since settled. The US dollar was trading at 102.82 yen, up from 102.30 yen. The pound was up 0.4% at $1.3479, still down sharply from the pre-vote level of $1.50. The euro rose to $1.1145 from $1.107.
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