SHAW.L Share News (SHAW)

LONDON (Alliance News) - Stocks ended in the green Tuesday for the first time since the UK voted to leave the European Union last Friday, with the pound also recovering from multi-year lows, despite the uncertainty over the UK's future relationship with the EU still commanding sentiment among investors.

Whether bargain hunting or a dead cat bounce, investors returned to equities following the sharp declines seen after the Brexit vote, helping the worst hit stocks such as insurers recover some of the ground lost.

The FTSE 100 ended up 2.6%, or 158.19 points, at 6,140.39. The FTSE 250 added 3.6%, or 535.20 points, to 15,503.06, and the AIM All-Share rose 1.7%, or 11.43 points, to 688.39.

UK Prime Minister David Cameron was meeting EU leaders in Brussels Tuesday afternoon, with a work dinner scheduled for 1845 BST. This will be followed Wednesday morning by an informal meeting, without the UK, of the remaining 27 member countries on the "political and practical implications" of the Brexit, and the future of the bloc.

European authorities urged the UK to trigger the separation process from the bloc as soon as possible. At the extraordinary plenary session of the European parliament on Tuesday, European Commission President Jean-Claude Juncker said: "We cannot get into a period of extended uncertainty."

Juncker sought clarity from the UK on its exit plan. There should not be any secret negotiations on Brexit, he added.

Citing weak predictability, stability and effectiveness of policymaking following the referendum result, Standard & Poor's Global Ratings downgraded the sovereign ratings of the UK by two notches.

According to S&P, the lack of clarity will hurt confidence, investment, GDP growth and public finances. "Uncertainty surrounding possibly long-lasting negotiations around what form the UK's new relationship with the EU will look like will also pose risks," the agency said. Consequently, S&P lowered the ratings of the UK to 'AA' from 'AAA', and the outlook remained negative.

Fitch Ratings also trimmed the UK ratings, but by one notch to 'AA' from 'AA+'. The agency said the uncertainty following the referendum outcome will induce an "abrupt" slowdown in short-term GDP growth, as businesses defer investment and consider changes to the legal and regulatory environment.

The pound continued its recovery Tuesday after it touched a new 31-year low of USD1.3118 Monday. Sterling was standing at USD1.3318 at the London equities close Tuesday, compared to USD1.3207 at the same time Monday.

The euro also took back some ground against the dollar, quoted at USD1.1048 at the close Tuesday compared to USD1.0999 at the close Monday.

In Paris, the CAC 40 index in Paris added 2.6%, while the DAX 30 in Frankfurt rose 1.9%.

In New York, stocks were also higher, with the Dow 30 up 0.7%, the S&P 500 up 0.9%, and the Nasdaq Composite up 1.3%.

Economic activity in the US increased faster than estimated in the first quarter of 2016, a report from the Commerce Department showed. The report said the pace of growth in gross domestic product was upwardly revised to 1.1% from the previous estimate of 0.8%. The revised GDP growth in the first quarter compares to the 1.4% jump seen in the fourth quarter and the 1.0% increase expected by economists.

On the London Stock Exchange, the FTSE 350 Insurance/Assurance sector index ended among the best performing sector indices, adding 6.4%. However, the index is still down 15% since the equities close on Wednesday. Life insurer Prudential and Legal & General Group ended among the biggest blue-chip gainers, up 10% and 7.9%, respectively.

L&G said it has appointed Whitehall veteran John Kingman as its new chairman, after his appointment was approved by UK financial industry regulators. Kingman is the former Second Permanent Secretary of HM Treasury and is the former chief executive of UK Financial Investments, the body managing the UK government's stakes in Royal Bank of Scotland Group and Lloyds Banking Group.

Shares in Associated British Foods added 8.7% after the food, ingredients and retail group was upgraded to Buy from Hold by Berenberg. With the stock still down 10% since Thursday, the German bank said the recent sell-off provides an attractive entry point.

Outsourcing company Capita rose 5.4% after saying it has signed a five-year strategic partnership for customer management services with telecommunications company Tesco Mobile, which is part of supermarket Tesco. The deal is worth GBP140 million over the five-year term and is due to commence on August 1. Capita was also upgraded to Neutral from Underperform by Exane BNP.

FTSE 250-listed online grocery retailer Ocado Group rose 6.6%, after reporting growth in profit in the first half of its financial year. Sales grew on the back of a rise in active customer numbers and order volumes, Ocado said, although the average basket value declined in a deflationary food market.

At the other end of the mid-cap index, lender Shawbrook Group fell 14% after it said trading has been in line with its expectations in 2016 so far, but it will book a GBP9.0 million impairment charge due to irregularities uncovered in its Asset Finance unit.

Shore Capital cut its recommendation on Shawbrook to Hold from Buy, saying that its confidence on the group "has been severely damaged by this news". Shawbrook also said it had accepted the resignation of Tom Wood as its chief financial officer. Dylan Minto, currently director of strategy, will step in as interim CFO.

Gold miners ended in the red, after having benefited strongly from the climate of risk avoidance in equity markets as investors looked for safe havens such as the precious metal. In the FTSE 100 Fresnillo fell 2.3%, while in the FTSE 250 Centamin ended down 4.9%.

Gold was quoted at USD1,313.83 an ounce at the equities close, down from USD1,320.10 at the same time Monday, and well off its 2016 high of USD1,358.19 reached Friday. Conversely, Brent oil stood at USD47.81 at the close, compared to USD47.15 on Monday.

In the economic calendar Wednesday, Germany's Gfk consumer confidence data are at 0700 BST, while UK mortgage approvals and consumer credit data are at 0930 BST. Eurozone's consumer confidence is at 1000 BST. Germany's inflation is at 1300 BST.

In the US, personal spending data are at 1330 BST, while pending homes sales are at 1500 BST. The EIA crude oil stocks change data are at 1530 BST.

In the UK corporate calendar Dixons Carphone, Stagecoach Group, Greene King, and Torotrak publish full-year results. AFH Financial releases half-year results, while Bunzl and McCarthy & Stone issue trading statements.

By Daniel Ruiz; danielruiz@alliancenews.com

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