Global markets gained Wednesday, extending a broad-based relief rally as fears receded that the U.K.'s referendum vote to leave the European Union last week could disrupt the world economy.
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European shares rose across the board, with the Stoxx Europe 600 advancing 1.6% in morning trade in Europe, led by financial and energy stocks. London's FTSE 100 added 1.8%, following gains in Asian markets.
The pound, which was on the firing line after the so-called Brexit vote, rose by 0.2% against the dollar in volatile trading. The British currency had on Monday fallen to a 31-year low against the greenback. The euro edged down by 0.1% against the buck.
U.S. futures markets pointed to a 0.4% opening gain for the S&P 500. Changes in futures aren't necessarily reflected in market moves after the opening bell.
The market gains follow a tumultuous aftermath of the Brexit vote that saw global shares and sterling plunge as investors feared it would herald slower global growth and extend the period of ultralow interest rates. Political uncertainty in Britain, where Prime Minister David Cameron resigned after the referendum, added to the jitters.
Andrew Sheets, chief cross-asset strategist at Morgan Stanley, said that after the initial market rout, investors are now gauging the risks to be lower than during the Lehman Brothers bankruptcy that unleashed the financial crisis in 2008 or at the height of the European debt crisis.
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"People are starting to take stock that this is more country-specific and is not affecting markets everywhere," he said. "So far, it doesn't appear to be a big risk to global growth."
Still, Mr. Sheets cautioned that some assets, including European shares, could have further to fall due to the continuing political and economic uncertainty in Britain.
"The U.K. voted for an exit without having a clear exit plan," Mr. Sheets said. He expects the pound to fall to a trading range of $1.25 to $1.30 and European equities to fall 5% to 7% before they become attractive for investors.
Politics will again take center stage in Europe today, as EU leaders continue to debate the implications of Brexit at a summit in Brussels. On Tuesday, the leaders told Mr. Cameron there would be no special deals for ex-members of the bloc.
Asian markets rallied Wednesday with the Nikkei Stock Average closing up 1.6%.
Japanese Prime Minister Shinzo Abe told his finance minister and the central bank chief to take any "necessary measures" to support the economy and financial markets, signaling his vigilance over the yen's resurgence following the U.K. vote.
The WSJ Dollar Index, which measures the greenback against a basket of other currencies, was down around 0.2%. The yen gained 0.2% against the dollar to $102.4.
Oil prices rose, with Brent, the global price gauge, up 1.2% at $49.61 a barrel, supported by the weaker dollar and the threat of union strikes in Norway. Gold also rose, by 0.5%, to $1,324 a troy ounce.