London close: Stocks close higher as investors push aside Brexit worries

The FTSE 100 closed higher on Wednesday as investors pushed Brexit worries aside for the time being and sought bargains.

With the government unlikely to trigger Article 50 any time soon, traders saw an opportunity to snap up cheaper stocks following Friday’s plunge in the market when Britain voted to leave the European Union.

“We could all understand the selloff seen on Friday and then again at the beginning of this week, but the storming rally on the FTSE 100, which has seen the index rally over 7% from Monday’s low, is much harder to explain, other than via the usual combination of short-covering and bargain hunting,” said IG senior market analyst Chris Beauchamp.

“The market has certainly been quite sanguine in its assessment of the situation, noting that, technically, nothing has really changed in the UK’s relationship with the EU, and that even negotiations about negotiations have yet to start.”

Prime Minster David Cameron has said he will not invoke Article 50, which formally starts the process of Britain’s exit from the EU, with his successor to decide whether to go ahead with Brexit. The new leader of the Conservatives is expected to be in place by 9 September.

European leaders met for the first time in Brussels without the UK on Wednesday, insisting that Britain would have to allow freedom of movement if it wanted access to the single market.

The pound was up 1.18% against the dollar at $1.35 by 1650 BST.

“The weakness in the pound will be helping considerably given how much of the FTSE’s profits are generated outside of the UK,” said Craig Erlam, senior market analyst at Oanda. “Unlike the FTSE, the pound has barely recovered and continues to trade near its lows.”

On the economic data front, the eurozone’s headline economic sentiment measure dropped to 104.4 in June, from 104.6 in May. Analysts had forecast a reading of 104.7.

German consumer sentiment is set to improve next month but uncertainty following the UK’s decision to leave the European Union could take its toll, according to data from market research group GfK. Its forward-looking consumer sentiment indicator rose to 10.1 going into July from 9.8, beating expectations for it to remain unchanged.

European Central Bank President Mario Draghi reportedly told EU leaders on Tuesday that Britain’s decision to leave the EU could reduce eurozone growth by a cumulative 0.3 to 0.5% compared to previous estimates over the next three years.

In the UK, house prices rose 0.2% in June compared to a month ago, Nationwide said. It marked the same rate of growth as the previous month and was better than the 0% expected by analysts.

In the US, personal income and spending grew as expected in May, pointing to solid growth in household consumption during the second quarter, according to some economists. Personal incomes increased by 0.2% month-on-month in May following a rise of 0.5% in the month before, alongside a 0.4% jump in consumption, according to the Department of Commerce.

Economists had been expecting a rise of 0.3% and 0.4%, respectively.

US pending home sales fell more than expected in May, according to data from the National Association of Realtors (NAR). The NAR’s monthly index declined 3.7% to 110.8 from a downwardly-revised 115.0 in April. This was steeper than the 1.1% drop expected by economists, with all four regions experiencing a cutback in contract activity last month.

Meanwhile, oil prices continued to climb as US weekly crude oil inventories fell more than expected and as strikes by Norwegian oil and gas workers loomed.

The Energy Information Administration said US crude inventories fell 4.1m barrels last week to 526.6m barrels. Analysts had pencilled in a 2.4m drop in barrels. However, the EIA said crude oil inventories are at “historically high levels for this time of year”.

Brent crude jumped 2.5% to $49.83 per barrel and West Texas Intermediate increased 2.5% to $49.09 per barrel.

On the company front, Dixons Carphone shares dropped as it reported full year revenue that missed analysts’ expectations.

Travel and leisure stocks declined, including TUI, IAG and easyJet, after a gun and bomb attack on Istanbul's Ataturk international airport killed 36 people.

McCarthy & Stone slumped as the retirement homebuilder said the UK's exit from the EU may have an impact on the timing and cost of the conversion of its order book of reservations into completions.

Shawbrook Group jumped as Credit Suisse maintained ‘outperform’ rating but cut its target price to 235p from 380p. “We acknowledge the macro risks from Brexit (which we now reflect in estimates),and are disappointed by yesterday's announcement about past "irregularities" in asset finance lending, but believe underwriting is fundamentally robust and that current depressed valuations are overdone,” said Credit Suisse.

Prudential rallied after Barclays reiterated an ‘overweight’ rating and target price of 1609p on the stock, saying the company is its “top pick among European insurers”.

Former head of the civil service Lord Turnbull, who served as a non-executive director at Prudential for almost a decade, said on Tuesday that British-based insurers may be better off outside the EU because capital rules have damaged competitiveness and constrained the sector's ability to expand. His remarks also gave peers Aviva and Legal & General a boost.

Housebuilders were sitting higher after Nationwide's better-than-expected data with Persimmon, Taylor Wimpey and Barratt Developments in the black.

Lloyds Banking Group shares fell as the company said it is to cut about 640 jobs and close 23 branches as part of its programme to cut costs and restructure the bank.

Mining stocks, including Fresnillo, Antofagasta and Anglo American, gained as metal prices rose.

Market Movers

FTSE 100 (UKX) 6,360.06 3.58%
FTSE 250 (MCX) 16,002.90 3.22%
techMARK (TASX) 3,146.30 3.11%

FTSE 100 - Risers

Fresnillo (FRES) 1,584.00p 9.32%
Taylor Wimpey (TW.) 132.90p 8.93%
Anglo American (AAL) 696.90p 8.06%
Persimmon (PSN) 1,444.00p 7.44%
Berkeley Group Holdings (The) (BKG) 2,550.00p 7.37%
Aviva (AV.) 391.60p 6.99%
ITV (ITV) 177.00p 6.63%
Barratt Developments (BDEV) 405.80p 6.51%
Antofagasta (ANTO) 442.00p 6.45%
Tesco (TSCO) 170.70p 6.39%

FTSE 100 - Fallers

TUI AG Reg Shs (DI) (TUI) 845.50p -3.70%
Dixons Carphone (DC.) 336.00p -1.75%
Paddy Power Betfair (PPB) 7,935.00p -0.69%
Johnson Matthey (JMAT) 2,795.00p 0.25%
International Consolidated Airlines Group SA (CDI) (IAG) 359.30p 0.59%
SABMiller (SAB) 4,340.00p 0.70%
Lloyds Banking Group (LLOY) 55.39p 0.80%
Provident Financial (PFG) 2,310.00p 1.01%
Rexam (REX) 645.00p 1.02%
Hikma Pharmaceuticals (HIK) 2,413.00p 1.13%

FTSE 250 - Risers

Shawbrook Group (SHAW) 170.10p 21.50%
Countryside Properties (CSP) 217.20p 14.92%
Ted Baker (TED) 2,515.00p 14.79%
Allied Minds (ALM) 374.50p 13.45%
OneSavings Bank (OSB) 196.70p 9.40%
Euromoney Institutional Investor (ERM) 931.50p 9.27%
International Personal Finance (IPF) 274.90p 9.09%
Weir Group (WEIR) 1,400.00p 9.03%
BBA Aviation (BBA) 221.00p 8.76%
Virgin Money Holdings (UK) (VM.) 241.90p 8.48%

FTSE 250 - Fallers

Electrocomponents (ECM) 255.30p -2.26%
Brown (N.) Group (BWNG) 181.40p -2.00%
Bodycote (BOY) 510.50p -1.83%
Ocado Group (OCDO) 222.00p -1.77%
Carillion (CLLN) 236.10p -1.63%
QinetiQ Group (QQ.) 219.90p -1.43%
DFS Furniture (DFS) 210.00p -1.41%
McCarthy & Stone (MCS) 165.90p -0.84%
Fidessa Group (FDSA) 1,939.00p -0.82%
Domino's Pizza Group (DOM) 321.50p -0.59%