London (AFP) – World stocks rose Thursday and the pound hit 2016 highs as markets seemed geared up for a win by the “Remain” camp in Britain’s momentous referendum on EU membership.
Even as polls suggest a down to the wire outcome after a hotly contested campaign, traders appear confident that Britons will decide against pulling out of the 28-nation bloc.
“Another swing in opinion polls back towards Remaining in the EU has sparked a six-month high for the British pound and a surge in UK and European stocks,” said Jasper Lawler, analyst at trading group CMC Markets.
Financial markets have largely tracked polls in the countdown to the vote — the latest, an Ipsos MORI survey for the Evening Standard newspaper, put “Remain” on 52 percent and “Leave” on 48 percent.
London’s benchmark FTSE 100 swung 0.8 percent higher in mid afternoon trading, while eurozone indices in Frankfurt and Paris notched up more than one-percent gains.
In currency trading, the pound hit a 2016 high at $1.4947.
“Strength in UK equities and sterling suggests confidence that a Remain vote will prevail… helping avert potential financial, economic and political crises,” said Mike van Dulken, head of research at traders Accendo Markets.
But Oanda’s Craig Erlam said he would “possibly have expected” investors to be “a little more conservative” since the result is “far from guaranteed” and given the large number of undecided voters.
He warned of “quite severe” consequences in the market if voters opted to leave the EU.
Moneycorp traders also pointed to risks for sterling in the event of a British exit.
If that happened, they said, “Black Friday” would make the 1992 currency crisis that became known as Black Wednesday “look like a Sunday school picnic”.
“If the vote is to ‘Leave’, the pound gets trashed. If the vote is to ‘Remain’, some of the buying has already been done,” they said in a note to clients.
– Bracing for ‘sharp moves’ –
Markets suffered a sharp sell-off last week as polls indicating growing support for “Leave” triggered concerns about a potential global rout for share prices just months after a China-fuelled sell-off wiped trillions off valuations.
However with sentiment shifting to a “Remain” victory, equities have rebounded strongly this week.
“Anybody who is predicting this (outcome) with a high degree of certainty is delusional,” said Bill Fitzpatrick, portfolio manager at Manulife Asset Management.
The picture was more mixed in Asia, where Tokyo ended up 1.1 percent and Hong Kong rose 0.4 percent, while Shanghai closed down 0.5 percent down and Seoul shed 0.3 percent.
“Markets seem to have almost entirely priced in a ‘Remain’ vote win, meaning that the market moves and volatility around the vote may be far less than many had expected,” Angus Nicholson, a Melbourne-based market analyst at IG, said in a commentary.
“Nonetheless, markets are still incredibly nervous and some sharp market moves are likely over the next 24 hours.”
Financial institutions are reinforcing their trading teams to cope with the prospect of frantic trading through the day and the world’s leading central banks say they are ready to react to any eventuality.
Britain, which is the world’s fifth largest economy, will suffer a powerful blow to growth and jobs, corporate chiefs warned, if the country becomes the first state to defect from the EU in the bloc’s 60-year history.
– Key figures around 1350 GMT –
London – FTSE 100: UP 0.8 percent at 6,310.97 points
Frankfurt – DAX 30: UP 1.3 percent at 10,198.86
Paris – CAC 40: UP 1.2 percent at 4,430.75
EURO STOXX 50: UP 1.5 percent at 3,023.08
New York – DOW: UP 0.9 percent at 17,937.93
Tokyo – Nikkei 225: UP 1.1 percent at 16,238.35 (close)
Shanghai – Composite: DOWN 0.5 percent at 2,891.96 (close)
Hong Kong – Hang Seng: UP 0.4 percent at 20,868.34 (close)
Euro/dollar: UP at $1.1381 from $1.1313 late Wednesday
Pound/dollar: UP at $1.4838 from $1.4737
Dollar/yen: UP at 105.68 yen from 104.51 yen
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