European and US shares rebounded on Tuesday and the battered pound rose as markets digested Britain's vote last week to leave the European Union.
Bargain-hunting lifted stocks worldwide for the first time in three days, but there was still widespread uncertainty as the bloc's leaders, including soon-to-be-ex UK Prime Minister David Cameron, held their first post-vote meeting in Brussels.
Britain's finance minister, George Osborne, said the country would have to cut spending and raise taxes to stabilise the economy after a third credit ratings agency downgraded its debt.
“The lingering uncertainty favors further downside in the coming months as we have seen with other shocks of the past 5 years,” said Jeffrey Kleintop, chief global investment strategist at Charles Schwab & Co., Inc.
Still, the stock sell-off paused on Tuesday. European shares rose 2.4 per cent, clawing back some of their 10 per cent loss the wake of the UK's vote.
Bank shares recovered and led markets higher. The S&P financial index rose 2.47 per cent.
Britain's Lloyds and Barclays gained through the day, jumping 7.43 per cent and 3.38 per cent, respectively. Italy's UniCredit rose but then pulled back, last up 1.52 per cent, and Spain's Bankia surged more than 9 per cent before falling back slightly to a 8.24 per cent gain.
On Wall Street, the Dow Jones industrial average rose 269.48 points, or 1.57 per cent, to 17,409.72, the S&P 500 gained 35.55 points, or 1.78 per cent, to 2,036.09 and the Nasdaq Composite added 97.42 points, or 2.12 per cent, to 4,691.87.
Sterling also got a reprieve, recovering early though stalling in late trading in London.
The pound rebounded by as much as 1.5 per cent from its 11 per cent plunge after the British referendum. But that paled compared with the currency's decline to a 31-year low on Friday.
Sterling gained 0.86 per cent against the greenback at $1.334 and rose 2.32 per cent to 137.02 against the yen .
US Treasury yields opened higher but then flattened as worries about sluggish economic growth played off the rebound in stocks.
“A lot of the drop in yields will be sustained even as fears of the Brexit outcome fades. There's simply not enough growth," said Robert Tipp, chief investment strategist at Prudential Fixed Income in Newark, New Jersey.
Treasury prices, which more inversely to yields, added to gains after Moody's Investors Service changed its outlook on 12 UK banks and building societies late on Tuesday.
Benchmark 10-year notes were little changed in price to yield 1.461 per cent. The 10-year yield hit a near four-year low of 1.406 per cent on Friday, Reuters data showed.
The 30-year bond was up 4/32 in price to yield 2.274 per cent, down 0.6 basis point from late on Monday.
Gold stepped back after two heady days. Spot gold was down 1 per cent at $1,311.60 an ounce at 3:15 p.m. ET (1915 GMT), off an earlier low of $1,305.23.
Oil prices regained ground, rising 3 per cent, while investors refocused on potential supply outages and drawdowns in crude.
US crude oil futures settled up 3.3 per cent, or $1.52, at $47.85, while Brent crude rose 3 per cent, or $1.42, at $48.58 per barrel.
Overnight in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan ended up 0.5 per cent.