Iseq’s four-day rally recovers over 40% of Brexit losses

Irish and other European shares rallied for a fourth straight day on mounting conviction that central banks will ensure that the fallout from Brexit will be contained.

The market interest rate, or yield, on the Government’s 10-year bonds also fell to a fresh all-time low in early Friday trading.

Dublin’s Iseq jumped 1.9 per cent, having rebounded 8.5 per cent from its lows on Monday following two days of heavy selling in which the index slumped 17 per cent in the wake of the UK vote to leave the EU. Irish shares have now clawed back over 40 per cent of their post-Brexit losses.

The FTSE added 1.1 per cent today, while the Stoxx 600, a benchmark for the wider European market, rose 0.7 per cent.

Pledges from central banks around the world helped halt a two-day rout in global markets following the vote in favor of Brexit, which took the pound to a three-decade low and sent global stocks down the most since the financial crisis. Governor Mark Carney signaled the Bank of England could cut interest rates within months, and odds of the Federal Reserve raising borrowing costs as planned this year have dropped.

Irish and other peripheral sovereign bond markets have been helped by reports that the European Central Bank is considering loosening the rules for its bond purchases to ensure enough debt is available to buy in the aftermath of the Brexit vote.

“Policy makers have been very level-headed,” said Francois Savary, chief investment officer at Prime Partners in Geneva. “It’s all about the relief that central banks have intervened. But this rebound is not part of a new trend. There are still political uncertainties and let’s not forget that we’re in a low-growth environment where corporate profits are struggling.”

The yield on Ireland’s 10-year bonds fell through 0.5 per cent for the first time today to reach as low as 0.447 per cent, having been as high as 0.85 per cent last week and over 14 per cent at the height of the financial crisis in 2011.

(Additionak reporting, Bloomberg.)