After two days of turmoil over the Brexit vote the pressure on the UK financial markets has dropped with the FTSE 100 share index opening higher.
This morning the trading index was up 2% at 6, 102.01, and the FTSE 100 had gained a 2.5% share index. In the previous two trading sessions, FTSE had lost 5.6% while FTSE 250 had franked with 13.7%.
The pound has showed significant signs of rising against the dollar at 1% t0 $1.3356. On Friday morning, shortly before the Brexit vote result, the pound had a magnificent rise of $1.50. Unfortunately, on Monday the pound dropped against the dollar to a 31 year low and the trading on some shares was stopped temporarily.
In addition, the yields on the 10 year government bonds dropped below 1% on Monday. This was caused by investors who were interested in a cut on the interest rates.
The sectors that had experienced the worst loss were the ones that experienced the highest rise on Monday leading to the recovery of the UK market. Among these areas were airlines, property and banks. Lloyds and Barclays enjoyed an increase of 5% and 4.5% respectively. House builders Taylor and Persimmon also experienced a rise of 3.2% and 4.5% respectively. Airline Easyjet which was the biggest loser had a 4.3% rise on Monday.
When the gold price weakened on, the gold miners’ share that performed well on Monday were the biggest fallers on the FTSE 100.
Fresnillo nd Randgold Resources both had experienced a fall of 1.5%.
As Chancellor George Osborne had warned about the UK economic setbacks, the stock market rise was experienced. He released a report today at BBC’s that the UK is going through a prolonged period of economic adjustment due to the adaptation of life outside the EU. He also said that this is not going to be as economically rosy as life inside the EU noting that they are now in a position to provide a clear plan on the way forward.
Mr. Osborne stated that the recent market turmoil is natural. According to him, the markets are expected to move up and down as in the past 24 hours due to a prolonged period of adjustment. He said that there are contingency plans in place to meet this situation with banks already secured and safely working with the Treasury to ensure market stability.
In the statement, he made it clear that they are going to provide people with fiscal security while they show the world that they can live within the government means. However, there will be both spending cuts and tax rises.
On Tuesday, other markets such as the European stock markets made significant increases. The Cac in Paris made an increase of 2.5%, the Dax in Frankfurt went up with 2.2% while the Milan experienced a 4% rise.
The three stock exchanges have suffered a massive fall than London since the Brexit vote.