The FTSE 100 has rebounded to the levels seen before the Brexit result, ending yesterday at 6360.06.
The blue chip index has reached the level seen on Thursday night, before the results of the UK referendum on EU membership were revealed.
The index rebounded by more than 3.5 per cent yesterday, helping to wipe out losses, which at one point last Friday saw it fall more than 8 per cent.
However, Laith Khalaf, senior analyst at Hargreaves Lansdown, says the general rise in the index masks the facts that around a third of FTSE 100 stocks have lost more than 10 per cent of their value in the past few days.
In comparison around a third of stocks in the index have risen, with just a few rising by more than 10 per cent. However, the largest stocks have seen rises, including big hitters such as Shell, BP, British American Tobacco, Diageo, AstraZeneca, and GlaxoSmithKline.
“The share prices of big companies with international revenues have prospered, while those exposed to the UK economy have been severely marked down,” says Khalaf.
“In the last two days these domestic stocks have bounced significantly. It’s quite remarkable how quickly sentiment can move the price of stocks up and down without so much of a hint of company news. This once again serves to highlight why investors should tune out the short term fluctuations of the stock market, because they often defy rhyme and reason.”
Domestically-focused companies are still suffering, with the FTSE 250 being down around 8 per cent on its pre-Brexit price. However, the index has rebounded from previous lows.
Jason Hollands, managing director at Tilney Bestinvest, says that as bond yield have shrunk more investors are likely to move into equities, underpinning the market.
“With the FTSE 100 yielding 4.2 per cent at a time when 10-year gilt yields have shrunk to 0.95 per cent as expectations of further monetary stimulus have gathered pace, this yield gap should also underpin UK large-cap equities,” he says.
“These companies typically earn the majority of their revenues outside of the UK, so the weakness in the pound should be supportive to these companies as they translate dollar earnings into sterling profits and dividends.”
He adds that he remains cautious on the more domestically-focused stocks in the small and mid-cap space, despite there being “selective opportunities” amid the broad market selloff that occurred after Brexit.