Trader Jonathan Corpina, center, works on the floor of the New York Stock Exchange, Wednesday, June 29.Richard Drew/The Associated Press
Stock markets around the world rebounded for the second day on Wednesday as fears about last week's Brexit vote eased and investors wagered central banks would ultimately ride to the rescue with more stimulus.
Oil prices rallied and North American markets were sharply higher. Britain's FTSE 100 recovered all its post-Brexit losses to close at the highest level since April.
UK and European banks, a focus of concern since Britain shocked global markets by voting to leave the European Union, extended a recovery from two days of trading that had knocked almost 40 per cent off shares in Barclays and RBS.
An index of major European banks was up for the second straight day, but the gains could not come close to offsetting losses in the first two trading sessions after the referendum. Still, stock markets in Frankfurt, Paris and London all gained more than 2 per cent.
"While the initial panic from Brexit appears to have eased, a huge amount of uncertainty remains, which could continue to weigh on sentiment for a while," said Craig Erlam from online brokerage Oanda.
The Toronto Stock Exchange's S&P/TSX composite index finished up 194 points, or 1.4 per cent, to 14,036.74.
Nine of the index's 10 main groups were in positive territory, with consumer staples stocks falling.
Energy stocks climbed almost 3 per cent as a potential strike in Norway and falling production in Venezuela supported oil prices and traders moved money back into the market as the initial shock of Britain's EU exit vote wore off.
The materials group, which includes precious and base metals miners and fertilizer companies, added 1.7 per cent. Gold renewed its post-Brexit gains after a pause on Tuesday.
Canadian Imperial Bank of Commerce fell 2.6 per cent to $97.92 after it said it would buy Chicago-based PrivateBancorp Inc in a cash-and-stock deal valued at about $3.8-billion.
Wall Street was also higher on Wednesday, with the three major indexes recovering about half the losses suffered in the aftermath of Britain's shock vote to leave the European Union.
Oil prices jumped after the U.S. government reported a larger-than-expected weekly drawdown in crude inventories.
Chevron's shares were up 1.7 per cent, providing the biggest boost to the Dow. Exxon was up 1.7 per cent.
Adding to the upbeat sentiment, data showed U.S. consumer spending, which accounts for more than two-thirds of economic activity, increased 0.4 per cent in May.
The Dow Jones Industrial Average was unofficially up 285 points, or 1.6 per cent, at 17,694.68, the S&P 500 was up 34.66 points, or 1.7 per cent, at 2,070.75 and the Nasdaq Composite was up 87.38points, or 1.86 per cent, at 4,779.25.
"It's not the end of the world and it never was the end of the world, and to have these kinds of reactions was ridiculous," said Jeff Weniger, senior portfolio strategist at BMO Private Bank in Chicago. "People are starting to come to terms with it, starting to realize there aren't any of these major material changes, at least on the surface."
Britain's FTSE 100 closed at its highest level since April on Wednesday, as a two-day rally recouped the losses it suffered after Britain voted to leave the European Union.
Britain's FTSE 100 settled up 219.67 points, 3.6 per cent higher, at 6,360.06 points. The gains lifted the FTSE above last Thursday's close of 6,338.10.
The index had slumped as much as 8.7 per cent following the vote to leave the EU, which caused the pound to plunge. Its large weighting in dollar-earning companies and firms with international exposure shielded it from the worst of the post-referendum sell-off.
The mid-cap FTSE 250 remains down nearly 8 per cent since last Thursday and the pan-European STOXX Europe 600 is down nearly 6 per cent.
"The blue-chips are diverse, with decent global exposure," said Manoj Ladwa, head of trading at TJM Partners. "Some of the banks and travel stocks have taken a pounding, but we've seen a big switch into sectors and stocks which are predicted to outperform, with oil companies back in vogue."
At the heart of the recovery are expectations that major central banks will go easier on monetary policy in anticipation of another hit to global growth from Europe.
The U.S. 30-year Treasury yield approached record lows in a scramble for long-dated bonds on bets of more unconventional stimulus measures from major central banks.
"There are very reasonable expectations from central banks globally, especially from the U.S. Federal Reserve, the ECB and the BOE, to provide more liquidity, guidance and clarity to support markets," said Stephen Woods, chief market strategist for Russell Investments in New York.
The first Federal Reserve policymaker to comment since the vote, Governor Jerome Powell, said Brexit had shifted global risks "to the downside", reinforcing expectations the Fed will not hike U.S. rates this year and could even cut.
"The Fed is going to be slower to begin raising rates again," said Mark Zandi, Moody's Analytics' chief economist.
Traders have priced in a mere 17-per-cent chance of a hike as late as December, according to CME Group's FedWatch tool.
The MSCI world equity index of shares in 45 nations, rose 2.13 per cent. The index was on pace for its best two-day rally in 10 months.
Europe's broad FTSEurofirst 300 index rose 3 per cent.
Sterling, a big victim of the Brexit vote, was up 0.63 per cent at $1.3418 against the U.S. dollar after having hit a 31-year low on Monday.
Oil prices surged 4 per cent on Wednesday, with Brent settling above the psychological $50 a barrel mark, after a larger-than-expected drawdown in U.S. crude inventories.
It was a second straight day of gains for oil, which has risen nearly 8 per cent since Monday's settlement to recover almost all of what it lost after Britain's shock vote to exit the European Union.
Fading concerns over the so-called Brexit, potential for an oil workers' strike in Norway and a crisis in Venezuela's energy sector were among factors supporting Wednesday's rally.
While spot contracts in Brent and U.S. crude surged, the premium for longer-dated oil spiked too as traders bet crude in storage will fetch better prices in coming months.
The U.S. Energy Information Administration reported that crude stockpiles fell 4.1 million barrels in the week to June 24, the sixth consecutive week of drawdowns.
That was more than the 2.4 million barrels expected by analysts in a Reuters poll.
Brent crude futures settled up $2.03, or 4.2 per cent, at $50.61 per barrel. It hit a near one-week high of $50.74 during the session.
U.S. crude's West Texas Intermediate (WTI) futures also closed up $2.03, or 4.2 per cent, at $49.88. WTI's session high was $50.
"Aside from improving market fundamentals, bulls are also eager to keep prices at around $50 as we begin the second half," said John Kilduff, partner at New York energy hedge fund Again Capital.
Among longer-dated oil futures, the discount for December WTI versus December 2017 held near the almost three month high above $2.40 a barrel seen on Tuesday.
"We played on that curve to widen out and it was good for us," said Tariq Zahir, crude spreads trader for Tyche Capital Advisors in New York.
The discount in nearby oil versus forward, known as contango, has widened as traders took advantage of cheap freight to store oil on tankers on expectations of further price gains by 2017 as a crude glut abates.
Despite that, some were bearish on their longer-term view of oil as the EIA also reported an unseasonably large rise of 1.4 million barrels in gasoline stockpiles versus analysts' expectations for a 58,000-barrel draw.
On the East Coast, gasoline stockpiles rose to record levels.
"I am still unimpressed with overall crude draws for June," said Scott Shelton, energy futures broker with ICAP in Durham, North Carolina. "With 16.7 million barrels per day of crude runs and production declines, we should have larger drawdowns for Q2. That has simply not happened."