Stocks Advance Before Brexit Vote While Pound Slips With Gold

  • Polls show EU membership vote close 2 days before referendum
  • Most Asian index futures signal gains after Monday’s surge

Countdown to Brexit: U.K. Referendum Looms Over Markets

U.S. stocks climbed with global equities, while gold sank the most in four weeks amid easing concern among investors over the U.K.’s vote to remain in the European Union. The pound retreated along with oil.

The S&P 500 Index rose 0.3 percent in light trading two days before the British referendum. While sterling reversed a rally as opinion polls showed the outcome of the vote was still too close to call, momentum behind the Brexit campaign appeared to be ebbing. European shares advanced and the euro fell the most in a week after Mario Draghi said the European Central Bank is prepared to act if threats to its inflation outlook emerge. Gold sank 1.5 percent as crude snapped a two-day climb on concern over U.S. supplies.

Financial markets remain on edge ahead of Thursday’s U.K. referendum, amid concern a vote to leave the EU could anti-establishment sentiment elsewhere and fuel global instability. While most polls are still split on the outcome, betting shops put the probability of a Brexit at about 26 percent, the lowest level this month. At the same time, investors are grappling with further evidence that world growth remains tepid, with Federal Reserve Chair Janet Yellen telling the U.S. Senate that she wants the economy to be on a “favorable path” before the central banks consider hiking interest rates.

“The market was off last week for a few sessions and now it’s been doing a little bounce-back,” Stephen Carl, principal and head equity trader at Williams Capital Group LP, said by phone. “The market stayed pretty buoyant yesterday and the Brexit scenario has been more or less 50-50 for quite some time, so if nothing comes out of it then that helps as well.”

To follow our referendum live blog, click here.

Stocks

The S&P 500 climbed to 2,088.90 as of 4 p.m. in New York, following its steepest gain in almost four weeks on Monday. The U.S. benchmark stands 1.8 percent below an all-time high set in May 2015, with volumes 9 percent below the 30-day average.

Equities climbed after zigzagging most of the day, bolstered by a third straight advance for oil and gas companies, the longest in two months, even as crude oil prices dropped. Microsoft Corp. rallied 2.2 percent and Apple Inc. climbed 0.9 percent to lead technology shares higher. Falling biotech stocks dragged down health-care equities, while the dollar’s first climb in five sessions weighed on raw-materials companies.

The S&P 500 is trying to extend a rebound after anxiety that Britain would secede from the EU helped send the gauge to its worst weekly drop since April. Those declines halted a run-up from late May that put the index within 0.6 percent of an all-time high on June 8. The 2,100 point area is where previous rallies have faltered in the past year.

The MSCI All-Country World Index rose 0.3 percent, after climbing 2.3 percent over the previous two days. The Stoxx Europe 600 Index added 0.7 percent, with banks rising for a third day, while mining companies followed commodity prices lower.

Futures on Asian equity indexes were mostly higher, with Chicago-traded contracts on Japan’s Nikkei 225 Stock Average rising at least 0.1 percent with those on indexes in Australia and South Korea. Futures on Hong Kong’s Hang Seng China Enterprises Index fell 0.1 percent.

Currencies

The pound slipped 0.3 percent to $1.4652, after earlier reaching $1.4783. The currency surged 3.5 percent over the previous two days. Billionaire investor George Soros said sterling may slump more than 20 percent should British voters choose to leave the EU, a devaluation that would be bigger and more disruptive than when he profited by betting against the currency in 1992.

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, rose 0.3 percent. The gauge had weakened every day since the Fed left benchmark rates unchanged last week and Yellen said the Brexit vote was a factor in the bank’s decision.

The yen retreated, halting a rally that matched the currency’s longest under the reign of Japanese Prime Minister Shinzo Abe. The yen weakened 0.8 percent to 104.75 per dollar, after surging 3 percent over the last seven trading sessions. A technical indicator -- the relative strength index -- had reached a level that indicated a reversal was likely.

Commodities

The Bloomberg Commodity Index, which tracks returns on raw materials, fell 1 percent Tuesday as West Texas Intermediate crude dropped 1.1 percent to settle at $48.85 a barrel in New York, after rallying 6.8 percent in the past two sessions.

U.S. crude inventories probably declined by 1.5 million barrels last week, according to a Bloomberg survey before American government stockpiles data is released Wednesday.

Gold posted the biggest loss since May 24, as bullion futures for August delivery declined 1.5 percent to settle at $1,272.50 an ounce in New York. Silver futures for July delivery dropped 1.1 percent to $17.319 an ounce.

Corn futures slumped the most in three years in Chicago amid an improving supply outlook for the U.S. and Brazil.

Bonds

Ten-year Treasury notes fell for the first time in four days, sending yields up two basis points, or 0.02 percentage point, to 1.71 percent. The rate jumped eight basis points on Monday, the biggest increase in a month.

“The Treasury market remains at the mercy of event risk,” primarily the U.K. referendum, JPMorgan Chase & Co. analysts, including New York-based Jay Barry, wrote in a client note. In reaction to Yellen’s testimony, “we expect more muted yield moves, particularly given the market’s focus on global geopolitics,” according to the note.

Ten-year German yields fell from a two-week high amid the mixed Brexit polls.

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