US, European stocks rise, ending Brexit rout

A man speaks on a smartphone in front of the electronic stock indicator of a securities firm in Tokyo on June 9, 2016. Stocks in the US and Europe bounced back on Tuesday (Wednesday in Manila) as investors returned to the markets. AP FILE

NEW YORK, United States — US and European stocks rose sharply on Tuesday, making their first gains since Britain’s unexpected vote to quit the EU, while the pound rebounded as investors returned to jittery markets.

Trading floors appeared to have put the initial panic of Brexit behind them, with investors snapping up bargains after two days of heavy losses.

“It’s been a welcome respite for European equity markets today as investors start to absorb the impact of last week’s seismic miscalculation on the part of investors to the UK European Union referendum outcome,” said Michael Hewson, chief market analyst at CMC Markets.

“Concerns remain around UK company access to the single market, and there is an element of repricing risk going on in that regard, but for now it appears markets are starting to settle into their new equilibrium,” he added.

London’s benchmark FTSE 100 surged 2.6 percent, as did the CAC 40 in Paris, while the DAX 30 in Frankfurt rose 1.9 percent.

Wall Street followed European markets higher, with the S&P 500 climbing 1.8 percent.

“In the short term, we got pretty oversold,” said Art Hogan, chief market strategist at Wunderlich Securities in New York.

“We retraced about one third of the move downward and we still have as many questions as we did two days ago.”

The dollar retreated against both the pound and the euro after strong gains in the prior two sessions. Near 2100 GMT, the pound rose 0.8 percent to $1.3340.

But Kathy Lien, analyst at BK Asset Management, called the rise in the pound a “dead cat bounce” as Britain faces fundamental questions over who is going to lead the country and how they are going to negotiate a resolution with Brussels.

“There’s a lot of uncertainty left in Europe,” she said.

Brexit’s uncertain path

Meeting in Brussels, impatient EU leaders pressed a humiliated Prime Minister David Cameron to speed up Britain’s divorce from the EU, warning that Britain cannot expect special treatment outside the bloc.

Cameron said the split should be “as constructive as possible” and that he wanted the “closest possible relationship” with Europe afterward.

But German Chancellor Angela Merkel warned Cameron could not “cherry-pick” in the exit negotiations — and there would be a price for Britain to pay.

Large banks, which have endured two days of bruising losses, posted solid gains.

In Britain, shares in Barclays climbed 3.4 percent and Lloyds jumped 7.4 percent.

In France, BNP Paribas advanced 3.9 percent and Societe Generale gained 2.1 percent, while in Germany Deutsche Bank and Commerzbank each added around one percent.

In the United States, Bank of America rose 4.3 percent and JPMorgan Chase 3.3 percent.

Petroleum-linked stocks rose on higher oil prices, with BP climbing 2.1 percent, Total 3.3 percent and ExxonMobil 2.3 percent.

German auto giant Volkswagen climbed 1.7 percent after agreeing to a record $15 billion settlement in the US over some of its emissions-cheating diesel cars.

In Tokyo, shares of auto supplier Takata rose 2.2 percent after chief executive Shigehisa Takada told an annual shareholders meeting he would resign once the company recovers from a scandal linked to faulty air bag inflators linked to at least 13 deaths and scores of injuries globally.