Yahoo Finance Shares Extend Rally On Carney Stimulus Hope
UK stocks made further progress in recovering value on Friday after the FTSE 100 hit its highest level for almost 11 months on hopes of Bank of England stimulus.
The FTSE 100 and FTSE 250 both rose further - up by 1.13% and 1.2% respectively in afternoon trading - alongside larger increases on other major European stock markets.
The FTSE had surged as governor Mark Carney signalled yesterday that interest rates could be lowered even further than their record 0.5% benchmark - with further quantitative easing (QE) also not ruled out.
It (Other OTC: ITGL - news) had closed that day's session 2.3% or 144 points higher at 6504 - its highest level since last August, registering a third day of big gains for the financial markets.
On Thursday, the pound had tumbled back close to the 31-year low against the US dollar that it saw just after the shock Brexit announcement.
It fell just over a cent to 1.33 US dollars and 1.20 euros and moved only fractionally downwards on Friday.
One effect of the recent market mayhem has been greater demand for safe havens.
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Investors have been piling into gold and government bonds - with the UK 10-year yield falling to a new record low of 0.86% while two-year yields turned negative for the first time.
It is a boost for the Government as it means the cost of servicing its debts has never been cheaper but low yields will also widen pension fund deficits as the yields - effectively rates of interest - are used to calculate them.
The 10-year yield stood at 1.35% before the EU vote and has fallen further because of the prospect of more QE.
Such asset purchases, to boost the supply of money in the economy, tends to push up their cost to investors and hurt returns.
Market analysts cited speculation of further stimulus from the European Central Bank as a factor in the rising of share prices and falls in bond yields.
Shane Oliver, head of investment strategy at AMP Capital, said: "The week ahead will no doubt see bouts of Brexit-related nervousness but it may continue to settle down in the absence of any new developments in Europe."
Laith Khalaf, senior analyst at Hargreaves Lansdown (LSE: HL.L - news) , described the week as "tumultuous", adding: "As we head into July we can expect more of the same, as the knock-on impact of the Brexit vote continues to ripple through financial markets."
He said: "Looking forward, in the midst of the uncertainty that exists, it's easy to overlook the positive effects a lower pound will have on the stock market.
"Exporters will become more competitive, and UK companies with international revenues are likely to see a boost to their earnings when translated back into pounds and pence.
"Uncertainty is a two way street and, while Brexit will no doubt prove to be a rallying cry for doom-mongers, it pays to keep a level head, to sort fact from opinion, and to form a balanced view of what's going on, both positive and negative."
