Stocks advance with pound as Brexit chances retreat

BLOOMBERG

Global equities rallied and the pound strengthened the most since 2008 on signs the campaign for the U.K. to stay in the European Union was gaining momentum. The yen declined with U.S. Treasuries and gold as haven demand eased.
The Stoxx Europe 600 Index headed for its biggest gain since August and emerging-market shares advanced for a second day. Sterling jumped after a poll showed the campaign for the U.K. to remain in the EU leading by three percentage points before the referendum on Thursday. Spanish and Italian bonds gained and credit risk fell the most since March. The naira slid 23 percent after Nigeria let the currency float freely, and India’s rupee sank to this month’s low after the central bank chief said 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 last week. A poll taken since the killing and published over the weekend showed 45 percent of voters backed the ‘Remain’ camp, while 42 percent were in favor of a so-called Brexit — a turnaround from early last week when a slew of surveys put the latter group ahead.
Officials from central banks and governments around the world have signaled concern that a U.K. withdrawal from the 28-nation bloc could unleash a wave of turmoil across global markets. Federal Reserve Chair Janet Yellen, who’s due to address lawmakers this week, said last Wednesday that the British vote was a factor considered by officials as they decided to keep interest rates unchanged. Oddschecker data show less than 30 percent odds of a Brexit, from as much as 45 percent last week.

Stocks
The Stoxx Europe 600 Index jumped 3.3 percent at 6:06 a.m. in New York, for a second consecutive gain, with banks, financial-services companies and insurers leading the charge.
All major western-European markets climbed, with the U.K.’s benchmark FTSE 100 Index adding 2.2 percent. The volume of Stoxx 600 shares changing hands was 48 percent higher than the 30-day average and a measure of euro-area volatility slid 9.5 percent, its biggest drop since March.
UniCredit SpA jumped 4.9 percent after Italian newspaper Il Fatto Quotidiano reported — citing unidentified financial industry sources — that the bank is likely to appoint former government minister Corrado Passera as its next chief executive officer. Banco Bilbao Vizcaya Argentaria SA advanced 3.4 percent after reports that the Spanish lender instigated a new strategic plan in March that wasn’t announced to market. Futures on the S&P 500 climbed 1.3 percent, indicating U.S. equities will rebound from the biggest weekly decline since April.
The MSCI Emerging Markets Index of shares jumped 1.4 percent, the most in almost two weeks on a closing basis. Benchmarks in Poland, Hungary, and the Czech Republic climbed at least 1.3 percent, while equities in Turkey gained 2.1%. Stocks rose for a second day in Moscow, with Rosneft OJSC jumping 3.7 percent after two people familiar with the matter said Russia is seeking buyers for 19.5 percent of country’s biggest oil company.

Currencies
The pound strengthened against all 31 major peers, rising 1.9 percent versus the dollar, the biggest gain since December 2008. Among Group-of-10 currencies, the Swedish krona, Norwegian krone and Australian dollar all advanced at least 0.9%.
The yen dropped 0.4 percent to 104.66 versus the greenback, having surged 2.7 percent 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 percent toward 100 by the end of the year.
Eastern European currencies advanced versus the euro, with the Hungarian forint up 0.5 percent.
India’s rupee fell 0.4 percent after central bank Governor Raghuram Rajan said he’d step down when his term ends in early September. Nigeria’s naira weakened to 257.75 versus the dollar. Central bank Governor Godwin Emefiele announced the end of the currency peg on June 15 after holding the naira at 197-199 per dollar since March last year.

Bonds
Treasuries due in a decade fell, lifting their yield by six basis points to 1.66 percent, the biggest increase in a month. Two-year yields also rose before the sale of $26 billion of the securities on Monday.
The yield on German 10-year bunds increased four basis points to 0.06 percent, while those on Italian and Spanish securities with similar due dates declined. Yields in Japan, Germany and the U.K. slid to all-time lows last week as the potential for a British exit from the EU fueled demand for the safest assets.
Credit-default swaps on U.K. government debt dropped five basis points to be quoted at 35 basis points, according to CMA. That’s the biggest decline since October 2014.

Commodities
Gold slipped 1.1 percent after Brexit risk spurred a 1.9 percent surge in the precious metal last week. As of June 14, money managers held the second-biggest bet ever that bullion would rally further, according to U.S. Commodity Futures Trading Commission data. West Texas Intermediate crude climbed 1.6 percent to $48.75 a barrel as the dollar weakened. Nickel led gains among industrial metals, rallying 1.3 percent in London. Copper added 1.2 percent and zinc rose 0.7 percent.
Corn dropped 1.5 percent after capping a sixth weekly climb on Friday, while soybeans lost 1 percent following a 2.6 percent surge in the last session.