British Stock Markets Bounce Back Just Five Days After Brexit

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Guy Bentley Research Associate, Reason Foundation
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Following a huge beating in the immediate aftermath of the vote for Brexit, British stocks have recovered almost all the ground they lost since Thursday.

The FTSE 100 index surged Wednesday and broke through levels not seen since before the United Kingdom voted to leave the European Union. The FTSE 100 rose 3.6 percent and closed at 6,338.10.

Financial experts were surprised by the strong resurgence of British companies. “It is safe to say that, of all the post-Brexit outcomes discussed across the City over the past few months, ‘buying frenzy’ was not one that was viewed as very likely,” Chris Beauchamp, senior market analyst at spread-betting firm IG, told the BBC.

“The plethora of bargains on offer, plus a welcome period of calm in the UK/EU relationship has provided the opportunity for markets to recover in impressive fashion,” he added.

The FTSE 250, which took an even bigger hit than the FTSE 100 after the Brexit vote, also recovered to the same level it was at a week before Brits went to the polls, climbing 3.22 percent.

The British pound rallied and rose two cents against the dollar at 1.35. “With no likelihood of Article 50 of the Lisbon treaty getting triggered anytime soon, it seems that the status quo isn’t likely to change in the short-term,” said Michael Hewson, chief market analyst at CMC Markets.

One of the biggest reasons for the rebound is the expectation that the world’s central banks will ease monetary policy and pump further stimulus into the economy to counter the effects of Brexit.

In the U.S., the Dow Jones jumped more than 250 points — or 1.5 percent — thanks to rising oil prices and subsiding fears over the consequences of Brexit. (RELATED: Standard & Poor’s Strips UK Of Top Credit Rating After Brexit Vote)

It’s highly likely that U.K. markets will be subject to volatility for some time thanks to the uncertainty over Britain’s future leadership and relationship with the EU.

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