Hope grows for a stable market outlook

Global bourses will be hoping for a steady start to the month after the recent Brexit-fuelled rollercoaster.

Equities are largely forecast to escape last week’s volatility, as the shock of the British vote begins to wear off and central bankers remain poised in the wings.

The Bank of England’s governor, Mark Carney, hinted last week that UK interest rates may be cut to cushion the impact of the Brexit vote, while a rise in US rates, previously expected within months, has now been all but discounted.

“What’s driving the market is general dovish statements and comments from central banks across the globe and that is giving investors hope that the global economy will continue to grow,” said Tom Wilson, a senior investment manager and the managing director of wealth advisory at Brinker Capital.

“The central banks are saying they’re not going to let it slip into global recession and that’s causing the most bearish scenario to become less likely.”

Such reassurances caused European equities to recover strongly. The UK’s FTSE 100 rose 7.1 per cent for the week, closing 3 per cent higher than pre-Brexit levels, even though the broader FTSE 2050 index remains 5 per cent lower.

The Euro Stoxx 50 finished up 3.8 per cent for the week, while the S&P 500 finished just 0.5 per cent lower.

However, the threat of interest rate cuts in UK put further pressure on sterling, which remains 10 per cent lower against the US dollar than before the Brexit vote. Treasury bond yields, meanwhile, remain at multiyear lows as investors seek safe havens.


* with Bloomberg

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