LONDON (Alliance News) - Growing market fears of a potential British exit from the European Union caused investors to shed risk in favour of safe-haven assets, after recent polls suggested a lead for the Leave campaign just 10 days before the referendum.
The latest poll from YouGov showed the Leave campaign edge ahead of Remain before the June 23 vote, whilst a new poll from Brexit-backing Bruges Group showed a significant lead for Leave.
The new findings reinforced poll results reported by the Independent on Friday showing a 10-point lead for Leave.
A poll by YouGov for the Sunday Times showed a one-point lead for the Leave campaign, with 43% saying they will back Brexit compared to 42% backing Remain and 11% undecided. This is a reversal from the previous poll, which had 43% for Remain, and 42% for Leave.
Meanwhile, polling commissioned by Bruges Group showed a much bigger shift towards Brexit, with 52% of those polled planning a Leave vote and only 33% choosing to Remain, with 15% still undecided.
The fear of a Brexit caused the pound to drop to a two-month low against the dollar, at USD1.4113.
"Sterling volatility – a proxy for Brexit risk – is above 2008/09 levels, and bookmaker implied odds have risen from 20% on 26 May to 33% today," wrote Holger Schmieding, chief economist at Berenberg.
However, Schmieding expects the UK to decide against Brexit, based on the strong economic arguments that favour staying in the biggest common market in the world.
"In the last two major UK votes, the Scottish referendum of summer 2014 and the general election of May 2015, economic pragmatism prevailed in the end. In both cases, the outcome was much more clear-cut than opinion polls had predicted. In the end, a status quo bias seemed to shape the vote," the economist added.
Nevertheless, the recent polls rattled stocks. The FTSE 100 index was down 0.7%, or 44.85 points, at 6,070.91. The FTSE 250, which is more sensitive to a Brexit given the number of its UK-focussed constituents, was down 1.4% at 16,599.58. The AIM All-Share was down 0.8% at 733.50.
In Europe, the French CAC 40 index was off 1.4% and the German DAX 30 was down 1.3%.
Earlier, in the Asian equities session, the Japanese Nikkei 225 index fell 3.5%, the Shanghai Composite 3.2% and the Hang Seng index in Hong Kong 2.5%.
Industrial output in China grew 6.0% on year in May, the National Bureau of Statistics said on Monday - in line with consensus expectations and unchanged from the previous month. Year to date, output was up 5.9%.
However, China's NBS also said that retail sales were up 10.0% year-on-year - shy of forecasts for 10.1%, which would have been unchanged. Year to date, sales were up 10.2%. Urban investment also fell shy of consensus, growing 9.6% annually, versus the forecast of 10.5%.
"While retail sales and industrial production remained relatively flat, the trend is certainly geared towards further weakness in the Asian powerhouse," said Joshua Mahony, market analyst at IG. "Even if we manage to navigate the near-term threats of a Brexit and a likely US rate hike, the continued slowdown in China remains a significant ongoing risk to global demand."
The weakness in China added to the already risk-off mood of the market Monday. This helped to prop up the price of traditional safe-haven asset, gold, which traded at USD1,284.43 an ounce at midday, compared to USD1,268.40 at the London stock market close on Friday.
Gold miner Randgold Resources was amongst the biggest FTSE 100 gainer, up 1.1%, while peers Centamin, up 1.7%, and Acacia Mining, up 0.9% were amongst the best performers in the mid-cap index.
Ahead of the stock market open in New York, futures point the DJIA, S&P 500 and Nasdaq 100 indices all down 0.4%. Investors will be keeping a keen eye on Apple as the tech giant kicks off its week-long Worldwide Developers Conference in San Francisco, with Chief Executive Tim Cook expected to discuss new products and improvements to voice-recognition software Siri.
Back in London, Inmarsat was outperforming, trading up 3.2%. The satellite communications company said it has entered a strategic partnership with Australia-based satellite services provider SpeedCast International to deliver Inmarsat's Fleet Xpress maritime broadband service.
Under the partnership SpeedCast will integrate the Fleet Xpress service within its own maritime services portfolio, and over the next five years will roll out Fleet Xpress to around 2,000 vessels. Inmarsat said the two-way partnership will enable Inmarsat to use SpeedCast's "unrivalled" global Ku-band satellite network for its Xpress link customers.
G4S was the worst performer in the FTSE 250, down 6.0%. The security services company said Omar Mateen, the man who perpetrated a mass shooting in a nightclub in Florida early Sunday, killing 50, had been employed by the company since September 2007. G4S said that Mateen was off-duty at the time of the incident.
"Mateen underwent company screening and background checks when he was recruited in 2007, and the check revealed nothing of concern. His screening was repeated in 2013 with no findings," the company said in a statement.
AIM-listed Fitbug Holdings, down 19%, said it is considering raising equity in the near future and that talks are underway with its lenders regarding the company's debt pile, as it reported a wider loss in 2015. The wearable health-tracker maker reported a GBP6.5 million pretax loss in 2015 compared to the GBP3.8 million loss in 2014, as revenue almost halved to GBP1.3 million from GBP2.3 million.
Still ahead in the economic calendar is the UK Leading Indicators released by the Conference Board at 1430 BST.
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
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13 Jun 2016 09:25
