Global equities rallied and the pound strengthened by the most in three months amid signs Britons are warming toward the European Union ahead of a referendum on Thursday.
Haven assets including the yen, US Treasuries and gold slumped.
The Stoxx Europe 600 Index surged by the most since March as the MSCI Asia Pacific Index advanced with S&P 500 futures.
Sterling jumped after a poll showed the campaign for the U.K. to remain in the EU leading by three percentage points. The euro strengthened with high-yielding currencies, while the yen fell for the first time in seven days. India’s rupee sank to this month’s low after the central bank chief announced he will be stepping down.
Oil rallied with industrial metals as gold retreated from a five-month high.
Investor sentiment in recent weeks has been largely determined by Britain's debate over whether to stay in the EU and bookmakers' odds suggest the chances of a 'Leave' vote have faded since the murder of pro-European lawmaker Jo Cox on Thursday.
A poll taken since the killing and published over the weekend showed 45 per cent of voters backed the ‘Remain’ camp, while 42 per cent were in favor of a so-called Brexit -- a turnaround from early last week when a slew of surveys put the latter group ahead.
"We are seeing a risk-on move after the latest Brexit poll," said Niv Dagan, executive director at Peak Asset Management LLC in Melbourne.
“It may be short-lived and volatility is likely to remain high until Thursday’s vote. This really could still go either way.”
Odds at betting shops suggest there’s a 31 per cent chance of Britons voting to pull out of the EU, down from a record 44 per cent before Cox’s death, Oddschecker data show.
The referendum is being watched by governments, central banks and investors around the world amid worries that a UK withdrawal from the 28-nation bloc could unleash a wave of turmoil across global markets.
Stocks
The Stoxx Europe 600 Index climbed 2.6 per cent as of 8:07 am London time, after rallying 1.4 per cent on Friday.
Russian oil producer Rosneft OJSC added 2.3 percent in Moscow after President Vladimir Putin was said to be considering selling a 19.5 percent stake to China and India.
The MSCI Asia Pacific Index rose 1.7 percent, led by gains in raw-materials producers and energy stocks. BHP Billiton Ltd., the world’s largest mining company, gained 4.4 per cent in Sydney. Its Brazilian joint venture with Vale SA is exploring ways to restructure about $1.6 billion in loans.
Currencies
The pound strengthened against all 31 major peers, rising 1.5 percent versus the dollar. The euro appreciated 0.5 per cent, while the currencies of New Zealand, Norway and Sweden climbed 0.9 percent. South Korea’s won led gains in emerging markets with a 1.1 per cent advance.
“The markets have always been more comfortable with the U.K. remaining in the European Union, hence the boost to risk sentiment now that the ‘Remain’ camp’s campaign appears to be back on track,” Kathleen Brooks, London-based research director at Gain Capital Holdings, wrote in a note.
The yen dropped 0.5 percent to 104.66 versus the greenback, having surged 2.7 per cent last week as the Bank of Japan refrained from expanding monetary stimulus at a time when Brexit risk was spurring demand for haven assets. Former Finance Ministry official Eisuke Sakakibara, known as Mr. Yen for his ability to influence the exchange rate in the late 1990s, predicts the exchange rate will gradually strengthen more than 4 per cent toward 100 by the end of the year.
India’s rupee fell 0.4 percent following central bank Governor Raghuram Rajan’s announcement that he will be leaving the authority when his term ends Sept. 4.
“Given the uncertain global environment with the upcoming Brexit vote and a potential Fed rate hike, having someone like Rajan who has huge credibility stepping down at this time will not help confidence,” said Khoon Goh, a senior foreign-exchange strategist at Australia & New Zealand Banking Group Ltd. in Singapore.
Bonds staged a global rally last week, with yields in Japan, Germany and the UK sliding to all-time lows as the potential for a British exit from the EU fueled demand for the safest assets. In keeping interest rates on hold last Wednesday, Federal Reserve Chair Janet Yellen cited the risks posed by the Brexit vote as one reason to stand pat.
Commodities
Gold slipped 1.1 percent after Brexit risk spurred a 1.9 per cent surge in the precious metal last week.
As of June 14th money managers held the second-biggest bet ever that bullion would rally further, according to US Commodity Futures Trading Commission data.
Bloomberg
