UK stock index above pre-vote level: Crisis over? Not likely

The governor of the Bank of England Mark Carney gives a press conference, his first since the leave result of the European Union referendum, at the Bank of England in the City of London, Thursday, June 30, 2016. Carney says the uncertainty over Britain's exit from the European Union means the central bank will likely have to provide monetary stimulus this summer. (AP Photo/Matt Dunham, Pool) (The Associated Press)

LONDON – Britain's main stock market is back above where it was before the vote to leave the European Union plunged the country into turmoil. That doesn't mean all is back to normal for the economy, however.

The FTSE 100 index was up 0.4 percent at 6,387 on Thursday, above the 6,338 it traded before the vote's result plunged the country into an existential crisis and opened up a chasm of uncertainties for businesses.

But while the FTSE 100 is the main stock index, it is a poor indicator for the U.K. economy, as many of its listed companies are multinationals that benefit from the pound's 10 percent slide since the vote. Shares in companies that depend on the British economy are still down sharply, as is the currency, reflecting deep concerns about the country's future.

"The U.K. is on course for a technical recession in the second half of this year," said Samuel Tombs, chief U.K. economist at Pantheon Macroeconomics in London.

Investors will be looking ahead to a speech by Bank of England Governor Mark Carney later Thursday for reassurances as they face a panoply of risks.

Those include a drop in investment among businesses as it remains unclear what trade relationship Britain will have with the rest of the EU. Some have frozen hiring and issued warnings that their earnings will be lower than expected.

The FTSE 100's performance is flattered by the fact that many of its listed companies earn much or all of their money abroad. With the pound down about 10 percent since before the vote, that means their earnings are due to be boosted, not hurt.

Oil companies BP and Royal Dutch Shell make their money in dollars, the currency in which crude is priced internationally. Their shares are actually up 10 percent and 8 percent, respectively, since the vote.

Other companies that have global operations will see their earnings made in other countries boosted when repatriated to the U.K. Fashion powerhouse Burberry, which has become popular in Asia, has also seen its shares rise since last week.

The global footprint that Britain's biggest companies enjoy will help them through the uncertainty.

But beyond these considerations, there is no question that Britain's companies are taking a hard hit. Companies that depend on access to the EU market, such as technology and financial companies, are down sharply. Barclays bank is down almost 30 percent.

Another index of smaller, more domestic companies, the FTSE 250, is down 8 percent from before the vote. That includes companies involved in every aspect of the British economy — from property to retail, technology and services. For these companies, the pound's drop is of little value and they face a tougher time as the country slides toward recession.