(MENAFN- AFP) World shares rose Thursday and the pound held its ground as a heightened political drama in Britain, sparked by its decision to quit the EU, provided fresh surprise twists.
Wall Street echoed cooling gains in European markets after a robust two-day rebound from a heavy sell-off on the heels of the Brexit decision, even seeing London wipe out all its post-vote losses.
London's benchmark FTSE 100 index pushed 0.2 percent higher, slightly behind Paris, while shares in Frankfurt were just in the black, at 0.01 percent higher.
But Michael Hewson, chief market analyst at CMC Markets, noted that the equities rebound appeared to have left banking stocks behind.
"It is here that the soft underbelly of the European economy remains, with financials under pressure again after the US subsidiaries of Deutsche Bank and Santander failed the latest Federal Reserve stress tests for the second year in succession," he said.
In midafternoon trades, Barclays was 1.7 percent lower, Lloyds lost 3.3 percent, while Deutsche Bank shares were 3.6 percent down and Santander slipped 2.6 percent.
- Watchful central bankers -
Asian stock markets also climbed, tracking the rebounds in Europe and New York on Wednesday as markets recovered from last week's hammering.
Speculation that authorities will announce monetary easing measures to offset any negative impact have also provided strong support.
"The global central bankers are in the background and the markets realise that the central bankers are going to stand in front of any capitulation," Stephen Innes, a senior trader at Oanda Asia Pacific, said in a note.
Trading floors are rife with talk of fresh stimulus measures from key central banks.
After a $17 billion boost by South Korea, Japan is in focus after the country's prime minister, finance minister and central bank boss held talks on Wednesday.
Tokyo rose 0.1 percent, although it ended well off its earlier highs owing to profit taking having risen about four percent since Friday's close.
Hong Kong added 1.8 percent and Shanghai closed 0.1 percent down.
- In for a pound -
The pound held on to most of its gains versus the dollar as other higher-yielding, riskier, currencies benefited from hope that the fallout from last Thursday's referendum will not be as bad as feared.
Capital Economics economist Julian Jessop said "several plausible reasons" were behind why equity prices had recovered after the Brexit decision, some of which may be temporary.
"More positively, though, we think that the markets are right to recognise that Brexit, and especially some form of Brexit-lite, would not be as damaging as so many were arguing ahead of the referendum," he said in a note.
The pound slid slightly to $1.3416 but was considerably up from the 31-year-lows of $1.3121 it touched on Monday.
However, there remains plenty of caution as Britain and its EU partners struggle to reach a divorce agreement.
Further deepening the uncertainty, London's former mayor Boris Johnson, who spearheaded the Brexit campaign, on Thursday unexpectedly bowed out of the race to take over from Prime Minister David Cameron, an announcement greeted by a brief spike in the value of the pound. His Brexit ally, Michael Gove, meanwhile, threw his hat in.
Cameron is due to stand down in a couple of months' time, with European leaders adamant that London will not win any concessions to gain access to the vast single market.
- Key figures around 1345 GMT -
London - FTSE 100: UP 0.2 percent at 6,374.70
Frankfurt - DAX 30: UP 0.01 percent at 9,612.76
Paris - CAC 40: UP 0.3 percent at 4,208.59
Eurostoxx 50: UP 0.3 percent at 2,840.85
New York - Dow: UP 0.3 percent at 17,742.89
Tokyo - Nikkei 225: UP 0.1 percent at 15,575.92 (close)
Hong Kong - Hang Seng: UP 1.8 percent at 20,794.37 (close)
Shanghai - Composite: DOWN 0.1 percent at 2,929.61 (close)
Pound/dollar: DOWN at $1.3416 from $1.3455 Wednesday
Euro/dollar: DOWN at $1.1093 from $1.1124
Dollar/yen: UP at 102.91 yen from 102.80 yen
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