Stocks up as investors hopeful Britain will vote to stay in EU

Asian stocks edged up on Wednesday as investors were guardedly optimistic about a "Remain" vote in Britain's make-or-break European Union referendum, while Federal Reserve chair Janet Yellen's cautious tone virtually ruled out a July rate hike.

Europe’s FTSEuroFirst index of 300 leading shares was up 0.1 per cent, Germany’s DAX was up 0.5 per cent, France’s CAC 40 was up 0.3 per cent and Britain’s FTSE 100 was up 0.1 per cent. Basic resource stocks were among the biggest gainers in Europe, lifted by oil’s rise of almost 1 per cent.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4 per cent. Japan's Nikkei trimmed its losses to 0.6 per cent.

China's CSI 300 index and the Shanghai Composite both advanced about 0.4 per cent, while Hong Kong's Hang Seng reversed earlier losses to climb 0.5 per cent.

On Wall Street, the S&P 500 Index gained 0.27 per cent but was still below an 11-month high touched earlier this month.

Fed chief Yellen said on Tuesday the central bank’s ability to raise interest rates this year may hinge on a rebound in hiring that would convince policymakers the US economy isn’t faltering.

"A couple of months ago, Ms Yellen was cautiously optimistic. Now she appears cautious while trying to be optimistic," said Tohru Yamamoto, chief fixed income strategist at Daiwa Securities.

“Judging from her comments, a rate hike in July is completely off the table. It is questionable whether the Fed can have enough solid economic data to back up a rate hike even by September,” he said.

The dollar slipped 0.2 per cent against the yen to 104.57 yen, after a brief rally to 105.065 overnight as Ms Yellen expressed general optimism about the US economy.

Ms Yellen’s more circumspect view on the future path of US rates comes as many investors remain on the sidelines ahead of Thursday’s British referendum on its European Union membership.

Opinion polls

Polls in recent days showing rising momentum for the “Remain” camp helped boost risk appetite in global markets and have weighed on safe-haven assets such as German bonds and the Japanese yen since Friday.

But many investors are shunning trading as the vote remains too close to call, with an opinion poll published on Tuesday showing the “Remain” campaign’s lead had shrunk.

"We still have three polls on the UK referendum before the vote, and another shift back to Brexit will see risk appetite disappear in a jiffy," Bernard Aw, market strategist at IG in Singapore, wrote in a note.

The pound edged back to $1.4681 after climbing to as high as $1.4788 on Tuesday, its loftiest level since January 4th.

The implied volatilities of the pound have also pushed up from lows on Tuesday, reflecting investor anxiety over a sharp fall in the currency in the event of Brexit.

The euro also slid to $1.12555 from this week’s high of $1.1383 hit on Monday, turning negative on the week.

European Central Bank president Mario Draghi said on Tuesday that Britain's referendum was adding uncertainty to markets, and that the ECB was ready to act with all instruments if necessary.

As investors grew more hopeful of a “Remain” vote, spot gold languished, falling 0.5 per cent to a near-two-week low of $1,261.80 an ounce.

On the other hand, oil prices extended their recovery after news of a larger-than-expected draw in US crude stockpiles.

Crude inventories fell by 5.2 million barrels for the week ended June 17th, the American Petroleum Institute (API) said. The trade group's figures were triple the draw of 1.7 million barrels forecast by analysts in a Reuters poll.

Brent crude futures advanced 0.5 per cent to $50.88 per barrel, after rising high as $51.10 on Tuesday, its highest level since June 10th.

US crude futures’ new benchmark August contract rose 0.6 per cent to $50.14.

Reuters