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Sydney - Asian stocks rallied with UK equities futures and the pound surged by the most since 2009 amid signs Britons are warming towards the European Union ahead of a referendum on Thursday. The yen slumped with Treasuries and gold as haven assets fell out of favour.
The MSCI Asia Pacific Index rose by the most in two months as FTSE 100 futures soared as much as 3.3%. Sterling jumped after a poll showed the campaign for the UK 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% of voters backed the ‘Remain’ camp, while 42% were in favour 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 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% chance of Britons voting to pull out of the EU, down from a record 44% 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 MSCI Asia Pacific Index rose 1.6% as of 1:51 p.m. Tokyo time, led by gains in raw-materials producers and energy stocks. Japan’s Topix jumped 2.3%, with exporters Toyota Motor Corporation and Sony rallying more than 3% amid the yen’s retreat.
Japanese exports dropped in May for the eighth month in a row, data showed on Monday, before a speech by central bank Governor Haruhiko Kuroda.
BHP Billiton, the world’s largest mining company, gained as much as 3.8% in Sydney. Its Brazilian joint venture with Vale SA is exploring ways to restructure about $1.6bn in loans.
Russian oil producer Rosneft OJSC may be active in Moscow and London after President Vladimir Putin was said to be considering selling a 19.5% stake to China and India.
Futures on the FTSE 100 were up 2.9%, while contracts on the S&P 500 rose 1.1%.
Currencies
The pound strengthened against all 31 major peers, rising 1.6% versus the dollar. The euro appreciated 0.9%, while the currencies of New Zealand, Norway and Sweden advanced at least 1%. Poland’s zloty led gains in emerging markets, strengthening 1.2%.
"The markets have always been more comfortable with the UK 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% to 104.66 versus the greenback, having surged 2.7% 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% toward 100 by the end of the year.
India’s rupee fell 0.4% following central bank Governor Raghuram Rajan’s announcement that he will be leaving the authority when his term ends September 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 in Singapore.
Nigeria’s naira is expected to slide more than 20% to around 250 to 260 per dollar when the central bank allows the currency of Africa’s biggest economy to float freely on Monday, according to Chapel Hill Denham Securities, which is based in Lagos.
It was pegged at 197 to 199 through the end of last week, when three-month non-deliverable forwards were trading at 320.
Bonds
US Treasuries due in a decade fell, lifting their yield by five basis points to 1.66%. The rate on similar-maturity notes in Australia climbed six basis points to 2.14%.
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 fuelled 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 1.4% after Brexit risk spurred a 1.9% 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 US Commodity Futures Trading Commission data.
West Texas Intermediate crude climbed 1% to $48.46 a barrel, buoyed by a fourth straight decline in the Bloomberg Dollar Spot Index. Nickel led gains among industrial metals, rallying 1.5% in London. Copper added 0.8% and zinc rose 0.7%.
Corn dropped 2% after capping a sixth weekly climb on Friday, while soybeans lost 1.2% following a 2.6% surge in the last session. The US Department of Agriculture is set to release its US crop conditions report on Monday.
About 75% of the nation’s corn crop was in gold-to-excellent condition as of June 12, the USDA said last week.
