European stocks advanced, snapping their worst two-day losing streak since 2008, as investors speculated that policy makers may take action to shore up markets after the post-Brexit rout.
The Stoxx Europe 600 Index rose 2.5 percent to 316.32 at 9:19 a.m. in London. European stocks extended their two-day loss to 11 percent yesterday amid growing uncertainty surrounding the fallout from Britain’s shock vote to leave the European Union. The FTSE 100 recovered 2.2 percent today. The volume of European shares changing hands was twice the 30-day average, while for British equities, it was more than twofold.
“Stocks are rebounding on the expectation that there will be a coordinated intervention by central banks,” said John Plassard, a senior equity-sales trader at Mirabaud Securities in Geneva. “What central banks can do is put confidence back in the market by telling everyone that they are here and ready to act. If we don’t get that sort of support, we’ll see further declines.”
EU leaders gather in Brussels today for the start of a two-day European Council summit to discuss Britain’s decision to leave the bloc. Investors will also look to the Federal Reserve’s response after Chair Janet Yellen warned of the damage a Brexit would cause.
Fed Funds futures indicate little chance the U.S. central bank will raise interest rates by February, but an almost 23 percent likelihood of a cut as soon as September. Prior to the U.K.’s referendum, there was zero prospect of a reduction and a 52 percent chance of an increase.
It’s been a wild ride for European equities in the past few weeks, with the Stoxx 600 falling to its lowest level since February before rebounding 7.8 percent in the five days through last Thursday as volatility surged in the run-up to the vote. The index is now heading for a 9 percent decline in June, it’s worst monthly performance since August 2011.
Italian banks including Mediobanca SpA were among the biggest gainers on a measure of the euro-region’s lenders, after Vice-President for Euro Policy Valdis Dombrovskis said that the European Commission is in touch with Italian authorities over possible support measures following the recent selloff. Greek and Spanish lenders also surged.
Among stocks moving on corporate news, Nestle SA advanced 2.6 percent after naming Ulf Mark Schneider as successor to Chief Executive Officer Paul Bulcke, handing the reins of the world’s biggest food company to an outsider for the first time in nearly a century.
G4S Plc jumped 9.9 percent after Credit Suisse Group AG upgraded the security company’s rating to similar to buy from neutral, citing benefits from a weaker pound and the stability of its business. Redrow Plc climbed 7 percent after forecasting that full-year profit may beat analysts’ estimates.
Ocado Group Plc surged 11 percent as Goldman Sachs Group Inc. recommended buying the shares after the retailer reported continued sales growth.