Financial markets have bounced back over the past two days, despite still heightened anxiety about the economic implications of Brexit and a conviction from many economists that the UK is heading into recession.
Sterling this morning was trading at $1.3403, up almost two per cent from the low of $1.3148 hit on Monday (which was the lowest value of the pound against the dollar in 31 years).
Sterling off 31 year lows...
Shares are also now higher. This morning the FTSE 100 index of London-listed blue chip shares was trading at 6,300, up 2.62 per cent on the day and now only 0.55 per cent lower than where the index closed last Thursday before the referendum result was made public.
FTSE 100 trading higher...
The FTSE 250 – made up of smaller companies that do most of their business here in the UK – was battered by much more than the FTSE100 in the wake of the Brexit vote, falling 7 per cent both last Friday and on Monday.
But that index too has staged something of a recovery. It is trading at 15,809, up 1.89 per cent on the day and 5.5 per cent higher than its tough on Monday.
FTSE 250 also up...
However, analysts said that the stock market was still fragile, despite recent gains.
“The scale of this recovery seems improbable” said David Cheetham of XTB, the online trading firm
“Yes we are seeing a bounce for now, yet markets do not move in a straight line and Friday’s announcement has most certainly struck a more bearish tone that is likely to return before long” said Joshua Mahoney of the spread betting firm IG.
Further, a new survey by Bloomberg has found that a large majority of economists expect the UK economy to fall into a recession for the first time since 2009 now.
Twenty four of the 34 economists the financial news wire questioned said they expected two quarters of contracting output.
But economists expect recession
A majority also expect the Bank of England governor and fellow policy makers to be forced to stimulate growth by including cutting interest rates in the third quarter.
