Stocks, pound rally as Britain leans towards EU remain vote

A pedestrian passes a window displaying the British Union flag in London on June 10, 2016.
A pedestrian passes a window displaying the British Union flag in London on June 10, 2016. PHOTO: BLOOMBERG

LONDON (AFP) - World stock markets surged on Monday, led by rallying banking shares, on growing expectations that Britain will vote to remain part of the European Union in a hard fought referendum this week.

The British pound also rose sharply higher against the euro and dollar as the Brexit battle enters its final days, with latest polls showing the "Remain" camp gaining ground.

"The Brexit referendum is the only thing which counts on the markets and that should be the case until Friday's result," said Frederic Rozier, of Meeschaert Private Banking.

Traders on Wall Street also appeared to welcome the prospect of a status quo, with stocks 1.2 per cent higher at around midday.

Europe's main bourses all shot up, closing at least 3 per cent higher, with Paris' CAC 40 leading its Frankfurt and London counterparts.

Stock markets in Britain's European peers have their own reasons for warily awaiting the outcome of Thursday's vote, Russ Mould, investment director at brokerage AJ Bell, said.

"Markets in the UK and Europe seem to prefer the relative certainty offered by a 'Remain' vote," he told AFP.

"Were the UK to vote 'Leave', then the EU would face some potentially serious existential questions, as other countries may see eurosceptic parties pressing for their own votes on whether to stay or go."

On foreign exchange, the pound strengthened against the euro, to 76.99 pence to the euro, having earlier hit a near three-week strong point of 76.95 pence.

 

Against the dollar, the pound rose to US$1.4691, striking a three-week high earlier of US$1.4708 to the pound.

"If sterling is anything to go by, markets well and truly think voters have swung in favour of 'Remain'," said Joe Rundle, head of trading at ETX Capital.

Safe haven assets, the yen and gold, meanwhile retreated Monday after strong gains last week.

Despite the change in sentiment, the average of the last six British European Union referendum polls put the "Remain" and "Leave" camps neck-and-neck at 50-50, excluding undecided voters, according to the What UK Thinks website.

"We know markets abhor uncertainty, so the Brexit vote appearing settled this morning has already gone a long way to reduce the wall of worry," Mark Vickery, of Zacks Investment Research, said in a note to clients.

"After all, Great Britain remaining within the EU represents business as usual, whereas Brexit would usher in a host of uncertainty."

World markets had slid early last week as polls showed "Leave" in the lead, but Tokyo closed up 2.3 per cent on Monday, adding to gains of 1 per cent ahead of the weekend pause.

"As the UK steps in the crucial Brexit week, we are prepared for... choppy market conditions," said Ipek Ozkardeskaya, market analyst at London Capital Group.

Banking share prices rocketed Monday, with Royal Bank of Scotland closing just over 7 per cent higher in London, Barclays up 6.7 per cent, while BNP Paribas advanced 4.9 per cent in Paris deals.

Analysts said the "Remain" camp won some support after the murder last week of British MP and "Remain" campaigner Jo Cox.

British lawmakers gathered Monday to pay tribute to Cox, in a rare show of unity.

The vote on Thursday could see Britain become the first country to leave the 28-member European Union.

London - FTSE 100: UP 3 per cent at 6,204 points (close)

Frankfurt - DAX 30: UP 3.4 per cent at 9,962.02 points (close)

Paris - CAC 40: UP 3.5 per cent at 4,340.76 points (close)

EURO STOXX 50: UP 3.4 per cent at 2,946.59 points

New York - DOW: UP 1.2 per cent at 17,893.66 points

Tokyo - Nikkei 225: UP 2.3 per cent at 15,965.30 (close)

Shanghai - Composite: UP 0.1 per cent at 2,888.81 (close)

Hong Kong - Hang Seng: UP 1.7 per cent at 20,510.20 (close)

Euro/dollar: UP at US$1.1308 from US$1.1280 late on Friday

Pound/dollar: UP at US$1.4677 from US$1.4348

Dollar/yen: UP at 104.41 yen from 104.19 yen