FRANKFURT: European stocks closed sharply higher Wednesday, rising for a second straight session as investors picked up equities beaten down after last week’s U.K. vote. to leave the European Union.
The Stoxx Europe 600 SXXP, +3.09% climbed 3.1% to settle at 326.49, as all sectors advanced, led by telecommunication, oil and gas SXER, +4.68% and utility SX6P, +4.33% shares.
Meanwhile, London’s FTSE 100 UKX, +3.58% rose 3.6% to settle at 6,360, erasing its post-Brexit slide.
But travel services company TUI AG TUI, -3.82% dropped 2.6%, among the biggest decliners on the index, following a terrorist attack at Istanbul Atatürk Airport in Turkey that left at least 41 people dead. Other travel stocks that had been lower earlier, however, reversed course. Thomas Cook PLC TCG, +4.29% swung up 4.3% and British Airways parent International Consolidated Airlines PLC IAG, +0.59% moved higher by 2.8%.
The Stoxx 600’s rise followed Monday’s climb of 2.6%, a comeback after two sessions of sharp losses. That selloff was prompted by the Brexit vote in the U.K., in which voters supported a withdrawal by the country from the EU.
Push to talk: Days after last week’s referendum, the U.K. has yet to invoke Article 50 of the EU’s treaty, the first step in the withdrawal process. EU leaders in Brussels on Wednesday pushed for the declaration to be made as quickly as possible, but Britain’s Prime Minister David Cameron, who has announced his resignation, says his successor will be the one to launch the exit negotiations.
“We remain convinced that the Brexit threat will only become real if U.K. actually goes through with the invocation of Article 50 and it appears that this will not be the case for the time being,” wrote Boris Schlossberg, managing director of FX strategy at BK Asset Management, in a note.
“Although markets remain wary and cognizant of the existential risk of Brexit, as long the Article 50 is not invoked, further downside risk appears to be limited,” he said.
The remaining 27 EU members on Wednesday told the U.K. it can’t have access to the bloc’s single market without abiding by rules on the rights of EU citizens to migrate to other EU countries.
Banks: Most bank shares were higher Wednesday after being mauled in the wake of the vote. Spain’s Banco Santander SA SAN, +3.51% climbed 3.5%, London-based Barclays PLC BARC, +4.90% BCS, +4.11% charged up 4.9% and France’s BNP Paribas BNP, +3.02% rose 3%.
But most Italian bank shares turned lower following reports that German Chancellor Angela isn’t supportive of Italy’s plan to cushion its banks from the fallout of the Brexit vote. Italian officials want to craft a €40 rescue plan for its financial system, according to reports.
Banca Monte dei Paschi di Siena SpA BMPS, -2.87% fell 2.9%, Banco Popolare di Milano PMI, -3.38% lost 3.4% and Unione di Banche Italiane SpA UBI, -5.23% dropped 5.2%.
Indexes: Germany’s DAX 30 DAX, +1.75% rose 1.8% to end at 9,612.2, and France’s CAC 40 PX1, +2.60% gained 2.6% to finish at 4,195.32.
Italy’s FTSE MIB I945, +2.21% closed higher by 2.2% at 15,946, while Spain’s IBEX 35 IBEX, +3.45% tacked on 3.5% to finish at 8,105.30.
The euro EURUSD, -0.1348% fetched $1.1112, up from $1.1069 late Tuesday in New York. The pound GBPUSD, -0.1638% also bounced up, buying $1.3497 up from $1.3341 late Tuesday.
More Brexit developments: A petition for the U.K. government to hold a second Brexit referendum has gathered more than 4 million signatures. The parliament considers for debate petitions that get more than 100,000 signatures.
“We have a 30% chance of a second referendum which would take place if Boris Johnson is able to negotiate better terms (i.e. a brake on EU immigration),” said Credit Suisse global equity strategists in a note Wednesday. Boris Johnson is the former mayor of London who backed the “leave” campaign.
“More likely is a very protracted divorce, whereby the U.K. does not trigger Article 50 for a long time,” Credit Suisse said.
Meanwhile, J.P. Morgan said Wednesday that now it’s “base case is that Scotland will vote for independence and institute a new currency,” before the U.K. exits from the EU in 2019.
Scottish voters overwhelmingly voted to remain part of the EU, and Scotland’s First Minister Nicola Sturgeon says she wants to abide by that result.
