Global stock markets edged higher yesterday while sterling reversed gains after hitting a more than five-and-a-half-month high earlier in the day as polls and surveys showed the United Kingdom’s vote on leaving the EU on a knife-edge.
Mixed trading across asset classes pointed to uneasiness in markets, investors said, and came after Monday’s dramatic surge in “risk assets,” driven by polls showing the chance of the United Kingdom leaving the EU appearing to lessen.
Oil prices fell nearly $1, dropping back below $50 per barrel and ending a two-day rally as the latest opinion polls indicated tomorrow’s referendum could go either way. But gold, a safe-haven asset, continued to head lower.
Fed Chair Janet Yellen said global risks and a US hiring slowdown warrant a cautious approach to raising interest rates. Her comments before the Senate Banking Committee seemed to signal no pressing need for the Fed to raise rates.
The dollar strengthened against a basket of major currencies, surging 0.6 per cent against the safe-haven yen, which has retreated this week on indications the campaign for Britain to stay in the EU has regained momentum.
The MSCI’s all-country world stock index edged up 0.3 per cent after surging 1.7 per cent on Monday. Wall Street stocks as measured by the S&P 500 rose 0.3 per cent, initially pairing some gains after Ms Yellen’s cautious outlook.
The pan-European FTSEurofirst 300 index added 0.9 per cent after surging 3.7 per cent on Monday. Britain’s blue-chip FTSE 100 index edged up 0.6 per cent.
Two opinion polls published on Monday put the “Remain” camp, those campaigning for the United Kingdom to stay in the EU ahead before tomorrow’s vote, but another gave “Leave” a slight lead.
Brent crude oil fell back below $50 a barrel, which it past on Monday for the first time in a week in a rally driven by polls that appeared to show the “Leave” campaigns momentum weakening. It last traded at $49.95.
Concern that Britain, the world’s fifth-largest economy, will leave the EU has weighed on financial markets for weeks and has been cited by central bankers, including Yellen, as a major obstacle for the global economy.
Eurozone growth is gaining momentum but uncertainty is high and the inflation outlook is subdued so the European Central Bank stands ready to act if necessary, ECB President Mario Draghi said in comments yesterday.
Sterling, the main vehicle used by international investors to express a view on the referendum, rose as high as $1.4788, its strongest since early January, but gave up most of those gains to trade down 0.1 per cent at $1.4681.
The pound gained 0.8 per cent to 153.78 yen. The Japanese currency, which is often sought by investors in times of market uncertainty, also fell 0.6 per cent to 104.58 per dollar.