Irish shares, the most beaten-down market globally after the Brexit shock, continued a relief rally in late trading on Wednesday.

The Iseq index rose 2.6 per cent to 5,588.5 points, following on from a rebound on Tuesday. The FTSE 100 gained 3.6 per cent in London and the Stoxx 600, a benchmark for the broader European market, jumped 3.1 per cent.

Among Irish advancers, Permanent TSB added 5.3 per cent, CRH gained 5.4 per cent and Hibernia Reit edged 2.8 per cent higher.

However, Bank of Ireland reversed early gains to slide by 1.6 per cent to 18.5 cents cents. Investors are becoming increasingly nervous about plans by the lender, which has more than 40 per cent of its loan book in the UK, to return to paying dividends next year for the first time since 2008.

Wider sentiment was helped by speculation policy makers will use stimulus to blunt the impact of the UK's decision to leave the European Union.

Investors are looking to policy makers for support as they await Britain's plan for its extrication from the EU, something that's being held back by political upheaval in the country following the vote and prime minister David Cameron's consequent resignation. South Korea announced a fiscal stimulus package on Tuesday and Bank of Japan chief Haruhiko Kuroda said Wednesday that more funds can be injected into the market should they be needed. Futures indicate the Federal Reserve is unlikely to raise interest rates before 2018.

”I don’t think it’s shocking that cooler heads are prevailing temporarily ,” said Daniel Kern, chief investment officer of Boston-based TFC Financial Management. “The markets are discounting that there’s very little chance of the Fed raising rates this year. We’re definitely in the speculation phase of this process, and it’s going to be a while before there’s any real economic data to react to. It’s somewhat fragile as things are so fluid as new information comes in.”

(Additional reporting, Bloomberg)