European stock markets rebounded yesterday, led sharply higher by banking shares boosted by an apparent ebbing in the chances of a leave vote in Britain’s upcoming referendum on EU membership.
London’s benchmark FTSE 100 index climbed to 6,219.26 points, or 1.4% compared with Monday’s close, while the pound picked up a couple of cents against both the dollar and euro.
Frankfurt’s DAX 30 index rose 2.2 % at 10,057.31 points and the Paris CAC 40 jumped 2.5% at 4,431.52 points.
“European markets firmed yesterday boosted by a rise in financial shares, a drop in the euro and oil prices rising for the first time in three days,” said Jasper Lawler, market analyst at traders CMC Markets.
“Investors in the banking sector have seemingly taken heart from the suggestion from UBS Chairman Axel Weber that trading activity will pick up after the Brexit vote.
Flows out of the much-hated financial sector have abated since the Fed realigned expectations of a US rate hike this summer,” he added.
Shares in Barclays climbed 3.2% and RBS jumped 4.8% in London, while in Paris shares in BNP Paribas rose 3.7% and Societe Genarale shot up 5.4%.
In Frankfurt Deutsche Bank shares gained 2.6 % and Commerzbank added 2.7%.
Meanwhile, Yoav Nizzard at FXCM currency traders said that “European markets are sustained by a return in risk appetite by the intervention of Mark Carney, the governor of the Bank of England, who is determined to fight against a clearly harmful Brexit for the British economy which would also provoke a period of uncertainty in the eurozone.”
Carney has been outlining the risks of Brexit to lawmakers.
“Sterling saw a big move higher during the appearance of Bank of England governor Mark Carney at Brexit-focused inflation hearings, whilst another poll showed rising public support for Britain remaining in the EU,” said Lawler.
The pound rose to $1.4629 from a close of $1.4484 on Monday.
Against the euro, it climbed to 1.3120 from 1.2909.
Investors brushed off a survey showing that investor confidence in Germany fell unexpectedly in May as uncertainty over a possible exit by Britain from the European Union overshadows better-than-expected economic data.
The investor confidence index calculated by the ZEW economic institute decreased by 4.8 points to 6.4 points in May, the think tank said in a statement.
US stocks also pushed higher, with the Dow climbing 1.2% in late morning trading as sales of new homes in the United States surged in April to their best level since January 2008.