Wall Street rallies on hopes UK will vote to remain in the EU

US and European stocks surged as betting markets pointed to a win for the remain campaign.

Investors were hopeful the UK looked like voting to remain in the EU. Picture: AP Photo/Richard Drew.

US stocks posted their biggest gains this month, a sign that investors largely expect the UK to stay in the European Union in Thursday’s vote even as polls suggested a tight race.

European stocks also surged, while the British pound rose against the dollar as traders eyed signs from betting markets that the union could be set to stay intact.

Gold fell as investors moved out of the safe haven and into riskier assets.

The Australian share market is set to follow the upbeat global markets higher, with ASX futures up 43 points at 6.20am (AEST).

Financial markets have followed the referendum closely. Risk assets such as stocks and oil have typically gained when polls suggested Britain would stay, while haven assets have been favoured as polls tilted toward exit.

While recent surveys have suggested it’s close, betting markets have been more confident the Remain campaign will win. Thursday’s broad market rally, portfolio managers said, seems to be a sign that investors have leaned toward the bookmakers in evaluating the odds of a British exit, or Brexit.

“From the polls, it’d appear to be a coin toss. But the market has clearly embraced the bettors,” said Ronald Sanchez, chief investment officer of Fiduciary Trust Company International.

The Dow Jones Industrial Average rose 1.3 per cent. The S&P 500 gained 1.3 per cent, and the Nasdaq Composite advanced 1.6 per cent.

Financial stocks in the S&P 500 — the worst-performing sector this year — rallied.

European stocks surged. The Stoxx Europe 600 climbed 1.5 per cent, London’s FTSE 100 gained 1.2 per cent and Germany’s DAX rose 1.8 per cent. It was the fifth consecutive session of gains for all three indexes.

Traders and investors have described the market as being held captive to the Brexit vote in recent weeks.

“I don’t think there’s anything else on anyone’s minds at the moment,” said Barry James, chief investment officer of James Investment Research.

After the vote, the market “will find another subject to worry about,” such as when the Federal Reserve will raise interest rates, said Thomas Wilson, managing director of wealth advisory at Brinker Capital in the US

Investors could also return to focusing on corporate earnings, which have declined for four straight quarters compared with the year-earlier period, according to FactSet.

“There’s only so many things that will drive the market, and I think investors will be looking for some kind of signal that earnings growth is going to re-accelerate,” said Jurrien Timmer, director of global macro at Fidelity Investments.

In currencies, the British pound bounced around and was recently up 0.5 per cent against the dollar at $US1.4889. The dollar gained 1 per cent against the yen to Yen105.8340, while the euro gained 0.4 per cent against the dollar to $US1.1389.

The yield on the 10-year US Treasury note jumped to 1.741 per cent from 1.687 per cent Wednesday.

A vote to leave the EU is likely to raise questions about Britain’s economy and trade agreements as it renegotiates a relationship stretching back more than four decades. While investors are uncertain of the long-term impact of a Brexit on growth and investment, they are bracing for short-term losses on an out vote resulting from the uncertainty.

In contrast, if there’s a Remain vote, “we should have a relatively muted market reaction,” said Julien Jarmoszko, European equities manager at S&P Global Markets Intelligence. He said he expects UK financial shares and companies that are dependent on the UK consumer to benefit in the short term if Britain votes to stay.

There will be no exit polls when voting stations close, but investors expect to know the results early Friday London time.

Shares of technology company Twilio surged in their trading debut after the company’s IPO priced above expectations at $US15 a share late Wednesday. The stock rallied 91 per cent from the IPO price.

Shares of Macy’s rose 1.8 per cent after the company announced its longtime chief executive, Terry Lundgren, will step down.

Shares of Volkswagen jumped 3.1 per cent after reports that the company agreed to pay more than $US10 billion to settle claims related to its emissions-cheating scandal.

In commodities, US crude oil rose 2 per cent to $US50.11 a barrel. Gold, which analysts have said is being used a hedge against Brexit, dropped 0.5 per cent to $US1,261.20 an ounce.

Japan’s Nikkei Stock Average added 1.1 per cent, while Hong Kong’s Hang Seng rose 0.4 per cent. The Shanghai Composite Index, however, lost 0.5 per cent.

Dow Jones