Pound and shares rally after two days of record Brexit losses –as it happened

Graeme Wearden (until 2pm) and Nick Fletcher

from on 2016-06-28 17:14 (#1JKDR)

FTSE 100 has clawed back Monday's losses, after world markets suffer their biggest two-day falls in history

6.14pm BST

The volatility suffered by stock markets in recent days is unlikely to ease in the near future. The day saw a rebound following the sharp declines which came in the immediate aftermath of the Brexit vote, but the City is reluctant to bet too strongly on where markets go from here. Laith Khalaf, senior analyst at Hargreaves Lansdown, said:

It would be premature to call the bottom of the market, prices are still adjusting to the post-Brexit world, and it would be foolhardy to rule out further price swings.

The bounce in the Footsie does show there are buyers out there who are swooping in when prices fall sufficiently, but markets neither go up, or down, in a straight line, and things may yet have to get worse before they get better.

6.05pm BST

ECB president Mario Draghi has said Brexit could reduce European GDP by up to 0.5 percentage points, according to a document seen by Bloomberg.

[BREAKING] #ECB's Draghi sees slower growth for the Euro-area over next 3-yrs; could cut growth by 0.5%

Via @Business : @ECB President #Draghi suggests that #Brexit could reduce #Europe #growth rate by as much as 0.50 percentage points.

ECB's Draghi: Brexit recession will affect FX markets

ECB's Draghi: Concerned Brexit will lead to competitive devaluations

JUST IN: Draghi sees #Brexit cutting Euro GDP by as much as 0.5%, document shows https://t.co/H89WE9USD2 https://t.co/7x8MPiK8Yf

5.40pm BST

Here's the full Reuters report on the meeting between business leaders and government minister Sajid Javid:

Britain appears a long way from developing a clear plan on the country's future trading relationship with the European Union, the head of the Confederation of British Industry (CBI) said on Tuesday after a meeting with government.

CBI Director-General Carolyn Fairbairn said some firms were putting investment on hold after Britain's vote to leave the EU last week, and that they needed a clearer sense of what the government intended to do.

5.16pm BST

At the meeting between business leaders and the government, there were high levels of real concern following the Brexit vote according to the CBI.

Reuters reports the CBI saying that the government needed to develop a plan on the country's trading relationship with the EU very quickly. Businesses also wanted the government to get on with major infrastructure projects which are already underway. There were also concerns about rising prices, housing, and the insecurity being felt by migrant workers in the UK.

4.56pm BST

After two days of panic leading shares have regained a little of the lost ground. Joshua Mahony, market analyst at IG, said:

Today has seen a welcome reprieve from the incessant fear and risk aversion that has dominated financial markets since Friday's unexpected referendum result. The question on everyone's lips is whether we have seen an end to the selling, with many seeing current prices as an opportunity to buy their favourite firms at a temporary discount. [But] this selloff is unlikely to be over and perhaps the only thing that will truly raise risk appetite for good will be a faint glimmer of hope that we could see a second referendum.

Despite the binary nature of Friday's referendum result, far from providing a definitive answer to the markets, we now find ourselves in the eye of a political and economic storm. We have moved from a position of security and stability, to one where we do not even know who will lead the two main political parties in a year's time. David Cameron may have said that there is no way to go back on the referendum result, but Jeremy Hunt's suggestion that he would hold a second referendum reminds us that crucially the decision is no longer Cameron's to make.

4.46pm BST

UK business secretary Sajid Javid says maintaining single market access will be his number one priority in negotiations with the EU. He says British access to the single market may not take the same form as other non-EU countries. He says the UK economy remains strong and over the past few days investors have reaffirmed their commitment to the UK.

Javid says he will lead trade missions this year, will focus on maintaining single market access - that will be no.1 priority

.@SaijidJavid: Despite the current uncertainty, employer after employer has reaffirmed its commitment to the UK pic.twitter.com/E4ua243Psj

4.26pm BST

US banks with significant UK operations are likely to act sooner rather than later to shift their operations, according to ratings agency Fitch. It said:

The UK's decision to leave the European Union will be disruptive for US global banks with significant operations in the UK and will weigh on their profitability in the short to medium term, Fitch Ratings says. However, the impact is likely to be moderate as we believe they will be able to operate through other EU legal entities.

US global banks are likely to start strategically implementing parts of their contingency plans rather than wait for trade and service arrangements to be agreed. Resolution planning for US global systemically important banks was constructive for their Brexit contingency planning because of the requirement to rationalize and understand their global legal entity structure and activities.

3.56pm BST

After cutting the UK's credit rating from AAA to AA, Standard & Poor's has said it had no plans to downgrade any other EU country in the wake of the Brexit vote.

But it said it would decide whether any UK bank ratings should be cut in the coming weeks. Reuters reports:

"This does not lead to mechanical changes (in bank ratings)," S&P banking sector analyst Giles Edwards said on a webcast.

"But equally this (Brexit scenario) was not our base case... where we see a need to change ratings we will do so in the coming weeks."

3.49pm BST

Here's a link to video of Greek prime minister Alexis Tsipras arriving earlier at the European Council, warning the Brexit vote was a wake up call for Europe:

#EUCO Arrival and doorstep #Tsipras #GR @tsipras_eu on #UKReferendum #EUReferendum #UKinEU https://t.co/VEJhWHLFiH

Europe has reached a predictable crisis because of the democratic deficit, the absence of soc. cohesion & solidarity https://t.co/h1A2YKUIbb

3.18pm BST

More Brexit fallout. Siemens is putting new wind power investment plans in the UK on hold due to uncertainty caused by last week's Brexit vote, the Germany energy company has told the Guardian. Arthur Neslen reports:

A 310m manufacturing hub in Hull that employs 1,000 people will not be affected by the decision, and should still begin producing blades and assembling turbines next year.

But Siemens, one of the few firms to openly back a Remain vote, will not be making new investments until the future of the UK's relationship with Europe becomes clearer.

3.09pm BST

After higher than forecast US GDP figures, comes a better than expected consumer confidence number.

According to the conference board, the consumer confidence index came in at 98 in June, compared to 92.4 in the previous month and an expected 93.3. (This was before the outcome of the UK referendum of course.)

Slight uptick in consumer perception of the jobs market on the healthy bounce in Conference Board confidence. pic.twitter.com/GAe1N6XSQM

#Manufacturing activity in our region weakened in June, our new survey found. New orders and shipments declined. https://t.co/FcIsZF6ln1

3.03pm BST

Earlier UK chancellor George Osborne suggested taxes would have to go up to address the economic damage caused by Brexit.

So what taxes would they be? VAT could be one, according to tax specialists at Eversheds. The law firms partner Ben Jones said:

If tax rises are required, ironically VAT (the only real European tax and a prerequisite for EU membership) could be the tax most likely to increase. VAT is a huge source of tax revenue and relatively easy to increase, both practically and politically. Indeed, during the financial crisis of 2008 and after, VAT was increased from 17.5% to 20% as part of measures to tackle the fiscal deficit. Increases to income taxes, national insurance contributions or business taxes would most likely be far more publically unpopular and politically undesirable.

2.48pm BST

And here's the Greek prime minister on the lesson from Brexit as he arrives at the European Council:

Alexis Tsipras: hopes #Brexit will be wake up call for the rest of Europe.. Emergency initiatives to replace austerity with growth.

2.45pm BST

Back with the European parliament:

Today, the European Parliament called on UK to invoke Article 50 TEU as soon as possible. Read the adopted version: pic.twitter.com/lifoMxlENy

2.36pm BST

In tandem with other global markets, which have recovered a small part of the hefty declines seen in the wake of last week's Brexit vote, the US has moved higher in early trading.

The Dow Jones Industrial Average - down almost 900 points since the referendum outcome - has gained 144 points or 0.8% as bargain hunters dip their toes into the market. The S&P 500 has opened up 0.7% and Nasdaq 1.1%.

2.30pm BST

Representatives of several industries are due to meet business minister Sajid Javid MP this afternoon for a summit on the potential impact of the Brexit vote on UK firms, writes Rob Davies.

Food and Drink Federation director general Ian Wright will warn Javid that the industry faces a huge staffing shortfall if EU citizens are blocked from working in the UK.

"The UK food industry has almost 100,000 workers from the rest of the EU. We have an emerging gap of up to a further 130,000 workers as our ageing staff retire over the next decade," he said in a prepared statement.

2.22pm BST

Here's a video of Richard Branson discussing his Brexit concerns on Good Morning Britain:

2.13pm BST

Lloyds Banking Group is the latest to try and reassure on the consequences of Brexit, following rival Royal Bank of Scotland earlier.

Lloyds chief executive Antonio Horta Osorio has written to staff telling them the bank had "robust plans in place for either outcome", according to Reuters. He said its strategy would remain unchanged and its low risk lending approach and historic brands put it in a position of strength to "weather turbulence in our sector and the wider market."

2.02pm BST

1.58pm BST

The pound is accelerating higher. It's now gained almost two cents to $1.341, a jump of 1.5% today.

Shares in London are also pushing higher, as the City recovers some poise following two days of Brexit panic.

The main change from yesterday to today seems to be the performance of the banks. Accepting around 3 billion in a Bank of England liquidity auction this morning, the UK's banking sector is looking a bit rosier after having the colour completely drain from its face at the start of the week.

Barclay, Lloyds and RBS are the key stocks here; the trio suffered the most in the aftermath of Friday's Brexit announcement, diving up to 30% in the last 2 days of trading.

1.38pm BST

Newsflash from America: The US economy grew faster than expected in the first three months of this year, in some much-needed good news.

US GDP grew at an annual rate of 1.1%, a little faster than expected, and means a quarterly rate of almost 0.3%,

BREAKING: Final reading on 2016 first-quarter GDP at 1.1% vs. 1% expected https://t.co/fLydamX8H6

*1Q GDP BOOST CAME FROM REVISIONS TO EXPORTS, BUSINESS SPENDING

1.15pm BST

Over in Brussels, European leaders are gathering for a summit dominated by Britain's Brexit bombshell.

Cameron's likely final #EUCO doorstep the same as all the rest - quick bullish quote, no questions, stride off

England has "collapsed economically & politically" says Mark Rutte - UK's one time ally. No mention of football tho pic.twitter.com/hdoWwOxqv8

1.04pm BST

After two days of heavy falls, Wall Street is expected to rally today. Trading begins in 90 minutes.

US Opening Calls:#DOW 17281 +0.80%#SPX 2014 +0.72%#NASDAQ 4233 +0.79%#IGOpeningCall

12.50pm BST

Ireland isn't the only European country which would suffer from Brexit.

Fitch says that:

The most exposed countries are Ireland, Malta, Belgium, the Netherlands, Cyprus and Luxembourg, all of whose exports of goods and services to the UK are at least 8% of GDP.

Brexit will create a precedent for a country leaving the EU and we believe it increases political risk in several ways. It could boost anti-EU or other populist political parties, and make EU leaders more reluctant to implement unpopular policies that would have long-term economic benefits.

Fitch: #Brexit to pressure EU econs. Most exposed Ireland, Malta, Belgium, Holland, CY & LUX, all of whose exports to UK at least 8% of GDP.

12.12pm BST

Ireland's finance minister, Michael Noonan, says he hopes that the Republic can avoid being hurt by Brexit.....

Minister Noonan speaking at #NED - We're quietly hopeful that we won't get a major shock from #brexit. pic.twitter.com/dQdmfpnTLv

12.10pm BST

Rating agency Fitch has issued a warning that the Republic of Ireland could be downgraded because of the economic cost of Britain leaving the EU.

The UK vote to leave the European Union is negative for Ireland, raising risks to growth and creating uncertainty around future relations with Northern Ireland, Fitch Ratings says. It is unlikely to have any immediate implications for Ireland's sovereign rating in the near term, but a medium-term rating impact would be possible if the economic dislocation of Brexit were to prove severe.

Ireland's economy is highly exposed to Brexit. According to the Central Statistics Office (CSO), the UK accounted for 12.6% of Ireland's total goods exports in January-April 2016, and 24% of total goods imports. The UK also accounted for 20% of total services exports in 2014. Total goods and services exports to the UK are equivalent to around 17% of GDP. There could be significant sector-specific fall out. For example, the UK accounts for 49% of Irish agricultural exports.

Brexit would represent a symbolic moving apart of the UK and Ireland that could weaken confidence in the peace process in Northern Ireland and potentially impair cross-border relations and trade.

Ireland's minority government, which was formed in May after February's inconclusive election, has outlined its 'Contingency Framework' that will guide its policy response. This identifies priorities including UK-EU negotiations, UK-Irish relations, trade and investment, and Northern Ireland. It remains to be seen how effective this will be, and some domestic political uncertainty persists given the relatively loose agreement between Fine Gael and Fianna Fail.

11.30am BST

The pound is clinging onto its early gains this morning, as stability returns to the City.

Sterling is still up around 1.1 cents today, at $1.3334 against the US dollar.

Woohoo! Pound heads for first post-Brexit gain as record selloff abates https://t.co/xVCXl60RpU pic.twitter.com/yo1DlMk02B

Today will see the very first EU summit where leaders of all of the EU's 28 member states will meet in Brussels for a first exchange about the British referendum and the consequences involved.

We can expect the pound to remain under pressure for the time being as markets come to terms with the result of Friday's referendum vote.

Stephen King at Treasury committee says sterling's fall so far is consistent with predictions of GBP $1.20 by end of year

10.48am BST

Newsflash: UK banks have taken 3bn of liquidity from the Bank of England in a special auction.

That money is meant to help them handle the repercussions of the Brexit vote last week.

10.04am BST

Virgin tycoon Sir Richard Branson has warned that Chinese business partners are already pulling investment from the UK after the EU referendum.

"I met with a group of Chinese businessmen yesterday morning who have invested heavily in England and who are now going to stop investing and withdraw investments they've already made."

"I'm afraid that based on misinformation, people voted for Brexit, which is basically voting for a way of shooting themselves in the foot. The last 2 days has been absolute pandemonium worldwide in the markets, the pound crashing, the stock markets crashing, and we are heading rapidly towards a recession again. It's just too sad, so so sad.

"Businesspeople do not want politicians to completely and utterly wreck the hard work they've done for years and years and that is effectively what happened. Thousands and thousands of jobs will be lost as a result of this. Thousands of jobs that would have been created will be lost and the knock-on effect will be so dire.

"The sad thing is I really think Brexiters were misled and did not realise.

9.43am BST

The boss of Royal Bank of Scotland has written to staff, warning that the EU referendum decision has created "short, medium and longterm" economic uncertainties, according to Reuters.

"As someone born outside the UK, I see one of this country's biggest strengths as its openness to the rest of the world, and the people of it. As a major employer and backer of the economy we have a duty to ensure that we reflect that..

"The diversity of those who make up this bank at every level is key to our success. In uncertain times I want to ensure that everyone understands that."

9.27am BST

George Osborne has also ruled himself out of becoming the next prime minister.

I won't be a candidate to succeed David Cameron - but will fulfil my duty to my country and help new PM unite party https://t.co/tX9H68XMxy

9.23am BST

Chancellor George Osborne has predicted more market turbulence, as Britain faces up to life outside the European Union.

Speaking on Radio 4's Today programme this morning, he said:

We are in a prolonged period of economic adjustment " it will not be as economically rosy as life inside the EU. It's very clear that the country is going to be poorer as a result of what is happening to the economy.

"Chancellor Osborne says we are absolutely going to have to cut spending and raise taxes" - Reuters. Brexit, the gift that keeps on giving

9.18am BST

Two major British companies, engine maker Rolls-Royce and the insurer Legal & General, have tried to shareholders that the UK referendum result won't sink their operations.

Rolls-Royce told the City this morning that its outlook is unchanged, while L&G argues that the long-term trends in insurance are unchanged....

9.15am BST

Germany's financial newspaper, Handelsblatt, is predicting a surge of banking jobs into Frankfurt from the City.

Exodus from the City as seen by #German newspaper @handelsblatt #Brexit pic.twitter.com/NQFaTvkPR4

9.12am BST

Online grocer Ocado has warned that the recent slump in sterling is likely to sent supermarket prices soaring.

Current levels of suggest UK inflation will hit 3% in 2017. The MPC likely will disappoint hopes of more stimulus pic.twitter.com/ywaBZhN7Oa

9.07am BST

Kit Juckes, currency expert at French bank Societe Generale, isn't impressed by the pound's small rally this morning (to $1.335 from $1.32 last night)

He is still worried about the political vacuum in Britain:

Markets are bouncing, and can bounce further but the clouds on the horizon are dark, and they're real.

Sterling can bounce to $1.35 for example- but the UK has no Government and no plan for the future.

8.50am BST

Billionaire businessman Sir Richard Branson has called for a second EU referendum this morning.

Speaking on ITV's Good Morning Britain, he also revealed that his Virgin Money operation has abandoned a deal, since Britain voted for Brexit....

BREAKING: Richard Branson tells @GMB "we are heading towards disaster" & there should be a second referendum. "Brexit facts were inaccurate"

BREAKING: Richard Branson tells @GMB 'We've lost a third of our value - and we've cancelled a deal worth 3,000 jobs' #Brexit

8.33am BST

One rally doesn't mean the Brexit crisis is over, remember....

UK stocks +2%, sterling up from its lows, crisis ov...

8.33am BST

It may seem curious that shares in London are rising, hours after Britain lost its AAA credit rating.

But Tony Cross, market analyst at Trustnet Direct, reckons S&P's downgrade may actually be encouraging investors back into the market.

It still seems as if we're a long way from the dust settling, but the FTSE-100 is starting Tuesday's session with a triple digit bounce. Yes we've seen three ratings downgrades for the UK overnight, but taking a glass-half-full perspective, this also means that just a little of the uncertainty is starting to ebb away.

Some stocks have taken a while to clear the auction, but this is a case of bargain hunters clamouring to get in.

8.27am BST

The French and German stock markets are also up by around 2% this morning, matching the recovery in London.

- #Brexit fallout
- Europe higher
- stronger
- Asia flat
- Gold falls
- Oil riseshttps://t.co/JpX6Jgbuum pic.twitter.com/FVuDrtS72v

8.23am BST

The UK FTSE 100 opens up 2% today at around 6100 and the UK Pound is half a cent higher too..

8.18am BST

European stock markets are rallying at the start of trading, after two days of big falls.

In London, the FTSE 100 has jumped by 125 points, or around 2%, to 6,109 - recovering some of yesterday's losses.

Sterling is strengthening for the first time since Friday's surprise referendum result on hopes policymakers are working to limit the economic fallout

8.04am BST

Over in Asia, governments are considering whether to launch new stimulus packages to protect their firms from the consequences of Brexit.

From Toyko, Justin McCurry explains:

Japan's economy minister, Nobuteru Ishihara, said on Tuesday that stimulus measures were likely to include assistance for small businesses.

"There are concerns about lessening the impact of the British referendum on Japan's small and medium-sized companies," Ishihara said.

7.59am BST

The Brexit shock has left UK companies worried about losing sales from overseas clients.

Our North of England editor, Helen Pidd, flags up that one small business is already seeing demand dry up:

Brexit in action? My friend Holly's company hasn't had one order from Germany or France since pic.twitter.com/Sblv8XuY0b

7.48am BST

After two days of intense pummelling, the British pound is clambering off the mat this morning.

Sterling has gained almost one cent against the US dollar so far today, to $1.3303.

Today's *massive* sterling rally in full: #boristability pic.twitter.com/VmMCAv0F60

7.37am BST

Global stock markets have suffered their biggest two-day rout ever, thanks to Britain's shock decision to vote to leave the EU.

"Friday was seen as a U.K. - E.U. problem, with the U.S suffering some damage on the side lines - Monday's global declines paint a more involved U.S. participation."

The bottom-line is we may still be in the knee-jerk reaction phase, but continued deterioration can feed on itself."

7.16am BST

Good morning.

Like the average England football fan this morning, the financial markets are in a gloomy and dejected mood.

Sterling 30yr low against $, huge rise in hate crime, rush for Irish passports
This is England
Tomorrow's Guardian pic.twitter.com/f4QjTAiV1z

Our European opening calls:$FTSE 6045 up 63
$DAX 9424 up 155
$CAC 4052 up 68$IBEX 7798 up 152$MIB 15402 up 299

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