European stocks lift in early trade

European markets have jumped sharply and London lifted more than 2pc as investors digest Brexit news.

Financial markets showed signs of stabilising on Tuesday, following sharp falls in the British pound and global stocks after the UK voted to leave the European Union last week.

The moves came as UK Prime Minister David Cameron traveled to Brussels on Tuesday to discuss the so-called Brexit with EU leaders.

The pound rose 0.8 per cent against the dollar to $1.332, though remained near a three-decade low reached Monday after a dramatic post-Brexit selloff.

By 10.30am British Summer Time (7.30pm AEST), London’s benchmark FTSE 100 index had gained 2.3 per cent.

Barclays PLC and Lloyds Banking Group PLC were both up around 6 per cent despite two credit-rating downgrades Monday night for the United Kingdom. The two banks’s fortunes are closely tethered to the UK economy and spending and investment. Italian banks also gained after reports Monday the Italian government might inject €40 billion ($US44.11 billion) into its banks.

Around the region, France’s CAC 40 had lifted 2.35 per cent, and Germany’s DAX had jumped 1.9 per cent. The Italian FTSE MIB had surged 3.65 per cent.

The Stoxx Europe 600 rose 2.4 per cent, having tumbled nearly 11 per cent over the previous two trading sessions.

Futures markets pointed to a 1.2 per cent opening gain for the S&P 500. Changes in futures aren’t necessarily reflected in market moves after of the opening bell.

Demand for haven assets eased, meanwhile, with gold prices falling and US Treasurys slipping slightly.

Investors continue to digest the ramifications of Britain’s unexpected referendum result for the global economy and European politics. A wave of selling following Thursday’s vote wiped out $3 trillion from global stock markets in two days.

Mark Dowding, a senior portfolio manager at BlueBay Asset Management, said global markets are likely to stabilise following the recent declines, noting the impact of Brexit won’t be felt as keenly in Europe and the US as in the UK.

“I’d be inclined to think we have seen most of the worst of it in the course of the last couple of days in terms of global assets, but we may not have seen the worst of it in terms of the UK,” he said.

Mr Dowding cautioned against reading too much into Tuesday’s bounce in sterling, though, warning that the pound could fall as low as $1.20 against the dollar following Thursday’s vote.

“You’ve got an economic crisis, a constitutional crisis, a political crisis. The outlook for the pound looks depressingly bleak,” he said.

Standard & Poor’s Global Ratings stripped the UK of its triple-A credit rating Monday and Fitch Ratings cut the country’s rating by a notch, predicting an “abrupt slowdown” in growth as businesses postpone investment.

“It’s going to be volatile for as long as we haven’t got clarity on what happens next,” said Russell Silberston, a fund manager at Investec Asset Management. “The UK doesn’t really have a government. We don’t have an opposition. We don’t know who’s in charge. The country is split.”

Asian shares mostly ended higher in choppy trade after Wall Street closed down for a second straight session, erasing three months of gains.

The Nikkei Stock Average closed up 0.1 per cent after earlier falling as much as 1.9 per cent earlier in the session.

In commodities, Brent crude prices rose 2.2 per cent to $48.20 after two sessions of declines, helped by a weaker US dollar.

The WSJ Dollar Index, which measures the greenback against 16 other currencies, was down around 0.5 per cent Tuesday after rising 2.7 per cent over the past two trading days. The euro was up 0.5 per cent against the dollar at $1.107 recently, while the dollar gained 0.3 per cent against the yen.