FRANKFURT/LONDON: European stocks logged a fourth straight session of gains Wednesday as investors appeared to remain confident Brits will vote to stay in the European Union.
The Stoxx Europe 600 SXXP, +0.38% rose 0.4% to close at 341.32. The benchmark, however, trimmed gains in the final minutes of the session after a poll showed a narrow lead for the ”leave” camp in the closely watched Brexit referendum on Thursday.
Other polls are pointing to a narrow win for the “stay” side, while the bookmakers put a less than 30% probability of Brexit, keeping final markets on a knife’s edge until the result comes out. All votes are likely to have been counted by 7 a.m. London time on Friday, or 2 a.m. Eastern Time, though results for the first counting areas are expected at 12:30 a.m. London time.
“Following the risk-rally of the last few days, we believe there is significant room for downside in the event of a “Leave” vote,” said Yianos Kontopoulos, global head of macro strategy, at UBS, in a note to clients.
“We estimate percentage moves in the midteens for U.K. and EU equities but materially smaller moves for the S&P 500 and emerging market equities.”
On Wednesday, insurance shares led the financial sector higher while bank shares were mixed. Insurer Allianz SE ALV, +0.58% picked up 1.3% and Direct Line Insurance Group PLC DLG, +2.20% rose 2.2%.
Among banks, Banca Monte dei Paschi di Siena SpA BMPS, -1.51% was down 1.5% while U.K.-listed Standard Chartered PLC STAN, +2.13% tacked on 2.1%.
The financial-services sector has been in focus in the face of the Brexit vote as well as a recent run low in bond yields, raising concerns about profitability in the sector.
If the remain camp wins, “[o]utside European and U.K. stocks (where a significant relief rally is likely to manifest) we would expect much less pronounced moves across assets,” Kontopoulos at UBS wrote. Among the possible moves, “[y]ields could rise more for core Euro-area bonds, which look the most expensive.”
Yields move in the opposite direction of prices. On Wednesday, the yield on the 10-year German bund TMBMKDE-10Y, +0.00% was up less than 1 basis point at 0.060%.
Indexes: The U.K’s FTSE 100 UKX, +0.56% ended 0.6% higher at 6,261.19.
Germany’s DAX 30 DAX, +0.55% rose 0.6% to 10,071.06 and France’s CAC 40 PX1, +0.29% edged up 0.3% to 4,380.03.
The euro EURUSD, +0.4249% was buying $1.1291 compared with $1.1257 late Tuesday in New York.
The pound GBPUSD, +0.6256% fetched $1.4681, paring gains after the afternoon poll that showed most support for the Brexiteers.
Movers: H&M shares HMB, +1.20% ended 1.2% higher. The Swedish fashion retailer posted a 17% drop in second-quarter profit, hurt by lower sales and strength in the dollar.
Air France-KLM SA shares AF, +1.11% rose 1.1% after a planned strike by the airline operator’s pilots was canceled.
