Global stock indexes jumped yesterday and sterling rebounded broadly after polls showed support for Britain staying in he EU strengthened before Thursday’s referendum.
At the start of what could be a frenetic weak for global markets, safe-haven assets such as the yen and gold retreated. Monday’s surge in equity markets saw Wall Street recover losses from last week, when the chances of the United Kingdom leaving the EU, or “Brexit”, appeared to be gaining momentum.
The surge in sterling, which rose more than two per cent against the dollar, coincided with a broad retreat in the green back as several polls showed the “Leave” campaign weakening. Markets will likely remain volatile and headline-driven in the run-up to the vote, which still appears too close to call.
The MSCI’s all-country world stock index surged 2.1 per cent, while Wall Street stocks as measured by the S&P 500 jumped 1.2 per cent, their strongest daily increase in nearly three weeks.
Two polls showed “In” regaining the lead and another showed the “Out” campaign’s lead narrowing, though the overall picture was of an evenly-split electorate. Bookmakers’ odds have shown those wishing to stay in the EU ahead, and Betfair put the implied probability of a vote to “Remain” at 72 per cent yesterday, up from 60-67 per cent on Friday.
US Treasury yields rose as traders trimmed safe-haven holdings of lower-risk government debt. Benchmark 10-year Treasury yield US10YT=RR rose over 5 basis points from late Friday to 1.675 per cent after reaching 1.680 per cent earlier yesterday.
The “risk on” move was more pronounced in Europe. The pan-European FTSEurofirst 300 index added 3.7 per cent, led by a 4.3 per cent rise in banks, while Britain’s blue-chip FTSE 100 index chalked up a 3.1 per cent gain.
Sterling rose as far as $1.4707 and was last up 2.4 per cent at $1.4693, having hit a two-week low of $1.4013 on Thursday. It soared 2.7 per cent to 153.53 yen and 1.9 per cent against the euro to 77.08 pence.
The euro, which has also suffered due to “Brexit” worries, strengthened 0.5 per cent to $1.1329, after rising as far as $1.1382.
The yen, often sought by investors in times of market tension, fell 0.4 per cent to 104.45 per dollar. The dollar fell 0.7 per cent against a basket of currencies.
German 10-year government debt yielded 0.063 per cent, up from a record low of minus 0.037 per cent on Thursday.
Oil prices, which have also been under pressure, extended Friday’s gains. Brent crude topped $50 a barrel for the first time since June 14. It last traded at $50.42, up $1.24 on the day.
Gold, another safety play, fell 1.1 per cent to just below $1,285 an ounce. It rose 1.5 per cent on Friday for its biggest single-day gain since June 3.