There is an eerie quiet across markets, one day before the year’s main risk event: with the UK referendum vote starting in less than 24 hours and results due out shortly after, it is as if even the algos have stopped frontrunning other algos, in a market so thin and illiquid even the smallest order can result in a gap, either higher or lower. As a result, European, Asian stocks and S&P futures are little changed ahead of Thursday, with the Stoxx Europe 600 Index swinging between gains and losses more than five times so far today.

As Chihiro Ohta, a senior strategist at SMBC Nikko Securities Inc. in Tokyo summarized: “what investors hate the most is uncertainty. Most are just waiting on the sidelines to see what happens.” Apparently Chihiro – as well as Janet Yellen – forgot that there is no such thing as certainty in the market, or least there wasn’t before central bankers took over.

So for now, as “sidelined” investors wait, the MSCI All-Country World Index was little changed following three days of gains as bookmakers’ odds implied there’s only about a one-in-four chance that Britons will opt to leave the EU in Thursday’s referendum, even as the FT poll of polls gives Leave a small advantage. Sterling rose against most of its 16 peers and shares in emerging markets advanced for a fourth day. Crude oil was set to close above $50 a barrel for the first time in almost two weeks following yesterday’s sharp drop in inventories according to API.

As we approach Friday, the first day when Brexit will be in the rearview mirror, the question is how much of a “Remain” vote has been priced in: global stocks have climbed in the past three days as odds of a so-called Brexit fell at betting shops after the murder of a U.K. lawmaker who favored staying in the EU on Thursday. The implied chance of a leave vote dropped to about 25 percent from 43 percent a week ago.

Here is how Deutsche Bank evaluates the market-implied odds:

The shift in opinion poll momentum towards ‘remain’ over the weekend has perhaps reversed a touch over the last 48 hours and the FT poll of polls is still forecasting a close run outcome. The betting market though suggests a much greater bias towards ‘remain’ and is currently predicting a 79.4% chance of success based on the Bloomberg indicator of political odds at bookmakers. That’s at the upper end of what’s been a wide range over the last month or so. Indeed the implied probability peaked at around 85% back at the end of May – where it held for some 10 days or so – before then toughing to a low of 61% intraday on the 16th June. So the probability is now 6% off the highs and 18% up from the lows.Whether this high number has an inbuilt expectation of a late shift towards the status quo (as with Quebec and Scotland referendums) we don’t know.

Some think they do know, and believe there is still some upside should Leave lose tomorrow: “‘Remain’ is not completely priced in as the costs of a ‘Leave’ could be quite large,” said Daniel Murray, head of research at EFG Asset Management in London. “It’s clear that betting odds are skewed towards remain at the moment, which is the main data the market will be moving on until there is a clear outcome.”

In this muted, illiquid environment, there was still some upside, with the MSCI AC World Index adding less than 0.1% as of 10:55 a.m. in London. The Stoxx Europe 600 Index swung between gains and losses more than five times after capping their biggest three-day advance in almost 10 months yesterday. The FTSE 100 Index of U.K. stocks rose for a fourth day in the longest run of gains in two weeks. S&P500 futures rose 0.1 % after the U.S. index closed higher in a zigzag session Tuesday. Adobe Systems Inc. fell 5.2 percent in pre-market New York trading after forecasting revenue in the current quarter that may miss analysts’ estimates amid slowing momentum for its cloud-based products. The MSCI Emerging Market Index rose 0.4 percent, following a 3.2 percent jump over the last three days. Chinese stocks led the advance on Wednesday, with the Shanghai Composite Index climbing 0.9 percent to a two-week high.

The yield on U.S. Treasuries due in a decade retreated from a two-week high, falling two basis points to 1.69 percent. The Fed’s Yellen reiterated on Tuesday that a vote to leave the EU could have “significant economic repercussions,” even as she warned against exaggerating its global impact. She had said on June 15 that Brexit risks played a part in the Federal Open Market Committee’s decision to hold off from raising interest rates. Yellen is scheduled to give a second day of testimony before lawmakers Wednesday.

This is where global markets stood as of this moment:

• S&P 500 futures down less than 0.1% to 2080
• Stoxx 600 up less than 0.1% to 340
• FTSE 100 up 0.2% to 6237
• DAX up 0.4% to 10059
• German 10Yr yield down less than 1bp to 0.04%
• Italian 10Yr yield down 2bps to 1.43%
• Spanish 10Yr yield down 2bps to 1.49%
• S&P GSCI Index up 0.5% to 382.2
• MSCI Asia Pacific down less than 0.1% to 130
• Nikkei 225 down 0.6% to 16066
• Hang Seng up 0.6% to 20795
• Shanghai Composite up 0.9% to 2906
• S&P/ASX 200 down less than 0.1% to 5271
• US 10-yr yield down 2bps to 1.69%
• Dollar Index down 0.1% to 93.93
• WTI Crude futures up 1% to $50.33
• Brent Futures up 0.7% to $50.99
• Gold spot down less than 0.1% to $1,267
• Silver spot down 0.4% to $17.22

Top Global News:

• Stocks Trade Near Week High Before Brexit Vote; Commodities Gain: Pound approaches 5-month high, oil rises with copper
• Yellen Leads Fed in Retreat as Reasons for Rate Hikes Fade: Economists see Fed chair in group calling for one 2016 hike
• Tesla Takeover of SolarCity Not a ‘No-Brainer’ for Investors: Oppenheimer analyst Colin Rusch downgrades Tesla to perform
• Gun-Curb Compromise Gaining Bipartisan Support in Senate: Republican Collins would ban gun sales to those on no-fly list
• FedEx Sees Profit in Line With Estimates on Moderate Economy: Co.’s outlook excludes just-acquired TNT Express
• Trump Beats Clinton for Investor Confidence in National Poll: Cash, gold top choices for those who plan to alter investments
• McDonald’s Gets Half Dozen Bids for China, H.K. Sale: Reuters: Co. gets bids from Beijing Tourism Group, Sanpower, ChemChina
• Fortune Brands to Replace Cablevision in S&P 500: Churchill Downs to join S&P MidCap 400 after close of trading Thursday
• Oil Explorers Embrace the Sharing Economy to Drill Cheaper Wells: North Sea drillers share warehouse of spare parts, tools
• Oil Trades Above $50 as U.S. Crude Stockpile Glut Seen Easing: Nationwide inventories decrease by 5.2m barrels: API

Looking at regional markets, Asia equities saw mixed trade with markets tentative as we approach closer towards the UK Referendum with the effects of the Remain momentum slightly waning. Nikkei 225 (-0.6%) underperformed with strength in JPY pressuring stocks and souring sentiment for exporters, while ASX 200 (+0.1%) was supported by Financials and Energy sectors after WTI briefly broke above USD 50/bbl following an API inventory drawdown. Elsewhere, Chinese markets traded higher with the Shanghai Comp (+0.9%) recovering from early pressure after another consecutive firm injection by the PBoC. 10yr JGBs saw flat trade with the risk-averse sentiment in Japan and the BoJ buying operations failing to underpin demand.

Top Asian News

• China Money Rate Increases Most Since March as Banks Hoard Cash: 14-day repurchase rate climbs 14bps to 2.93%
• Japan Unilateral Intervention Said Unlikely if Brexit Approved: G-7 statement, currency swaps use seen as options on Friday
• Powerful Storm Set to Hit Asian Bank Profits, McKinsey Says: Slower growth, weaker balance sheets may cripple ROEs
• Hong Kong’s Richest Man Calls for Higher Tax Amid Wealth Gap: Li Ka-shing says govt should give city’s youth more options
• SoftBank’s Arora Steps Down as Son Chooses to Stay in Charge: Co.’s president departs after Supercell purchase closed
• Mitsubishi Motors Sees First Loss in 8 Years Amid Scandal: Co. sees 205b yen impact from fuel testing fraud

In Europe, equities remain cautious ahead of the key risk event in the EU referendum, as such the Euro Stoxx (-0.06%) has been relatively flat for much of the morning albeit slightly softer. While notable underperformance has been seen in the FTSE MIB with Italian banks leading the way lower. Additionally, price action in credit markets has also been muted with yields near flat across the German curve, while there has been outperformance in peripheral yields.

Top European News

• H&M Earnings Decline on Weakest Sales Growth in 3 Years: Retailer says dollar’s strength will continue to inflate costs
• Merkel-Hollande Brexit Plan Said to Amount to Statement of Unity: EU risks months of volatility as key leaders preoccupied
• Ryanair CEO Says Brexit Vote Could Cause Whole of EU to Unravel: Says ‘Leave’ victory to mark end of European project
• Volkswagen Seeks to Quell Investor Uprising on Emissions Damages: Co. holds first shareholder meeting since scandal broke
• Ex-Deutsche Bank Executive in Asia Sues Lender for $17m: Douglas Morton files claims to Hong Kong labor tribunal
• Debenhams Falls as 3Q Trading Slows, Cut to Hold at Peel Hunt: 3Q update shows constant currency LFL sales down 1.6%

In FX, sterling appreciated 0.05 percent to $1.4659, after reaching a five-month high of $1.4783 on Tuesday. It’s jumped 3.2 percent over the past five sessions. Since British lawmaker Jo Cox’s murder last week “a fair bit of repricing has occurred in the pound on the back of the shift in polls that were earlier clearly favoring Leave,” said Rodrigo Catril, a currency strategist at National Australia Bank Ltd. in Sydney. “The pound will definitely be volatile ahead of the vote.” The Bloomberg Dollar Spot Index fell 0.2 percent, after snapping a four-day losing streak on Tuesday. The yen climbed 0.3 percent to 104.40 versus the greenback, extending this month’s advance to about 6 percent. The Australian and New Zealand dollars appreciated 0.5 percent.

In commodities, crude oil rose 0.9 percent to $50.31 a barrel in New York as U.S. industry data showed crude stockpiles declined, trimming a glut. Inventories fell by 5.2 million barrels last week, the American Petroleum Institute was said to report. Government data Wednesday is forecast to show supplies slid by 1.5 million barrels, slipping for a fifth week while still more than 100 million barrels above the five-year average. “The oil price will probably continue to labor around this $45 to $50 a barrel area for some time,” David Lennox, an analyst at Fat Prophets in Sydney, said by phone. “Demand is still under question. Inventories are declining, but they’re still large and will cap any significant rally.” Gold slipped 0.1 percent, after sliding 2.4 percent over the last two days.

On the again quiet US calendar, we have the FHFA house price index for April, as well existing home sales for May (which are expected to have risen +1.8% mom). Fed Chair Yellen is due to speak again, this time in front of the House Financial Services Committee at 3pm BST. Prior to this the Fed’s Fischer is due to speak in a panel at a Riksbank conference.

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Bulletin Headline Summary from Bloomberg and RanSquawk

• European equities remain cautious ahead of the key risk event in the EU referendum
• Price action in FX markets is somewhat mutes with Cable hovering around the 1.47 level
• Highlights Include Fed’s Yellen, DoE Crude Oil Inventories and US Existing home sales
• Treasuries higher in overnight trading as global equities mixed, gold sells off ahead of tomorrow’s Brexit vote; week’s auctions conclude with $28b 7Y notes, WI yield 1.485%, compares with 1.652% awarded in May.
• Fed Chair Janet Yellen sketched a cautious and uncertain view of the economy in testimony before lawmakers in Washington Tuesday; will appear before the House Financial Services Committee today at 10am ET
• Britain entered the final day of campaigning before its referendum on European Union membership with opinion polls and financial markets at odds about the outcome
• Markets in London are bracing for what could be a wild ride in everything from foreign-exchange to stock trading as the U.K. votes on European Union membership
• The pound climbed toward a five-month high versus the dollar as traders took cues from betting odds that point to the U.K. voting to stay in the European Union, rather than opinion polls showing the referendum is too close to call
• Japan’s Ministry of Finance views unilateral intervention as an unlikely tool in the event of a surge in the yen on Friday should the U.K. vote to leave the European Union

DB’s Jim Reid concludes the overnight wrap

In markets the last 24 hours has seen activity slow down and calm restored. The polls remain close though with the only one from yesterday being the Survation phone poll in the UK morning session which showed a 45/44% narrow lead for ‘remain’. The shift in opinion poll momentum towards ‘remain’ over the weekend has perhaps reversed a touch over the last 48 hours and the FT poll of polls is still forecasting a close run outcome. The betting market though suggests a much greater bias towards ‘remain’ and is currently predicting a 79.4% chance of success based on the Bloomberg indicator of political odds at bookmakers. That’s at the upper end of what’s been a wide range over the last month or so. Indeed the implied probability peaked at around 85% back at the end of May – where it held for some 10 days or so – before then toughing to a low of 61% intraday on the 16th June. So the probability is now 6% off the highs and 18% up from the lows. Whether this high number has an inbuilt expectation of a late shift towards the status quo (as with Quebec and Scotland referendums) we don’t know.

As mentioned at the top last there was a big live BBC televised debate on Brexit at Wembley Arena last night involving 6000 in the audience. It wasn’t quite as epic as Game of Thrones but it was the biggest event of the campaign. The betting odds were little changed over the course of the program. Meanwhile, in an interview with the Telegraph newspaper, PM David Cameron ‘guaranteed’ that he would use a vote to remain to push for further reforms on rules concerning freedom of movement. The last 24 hours has also seen the Daily Mail confirm that they are backing the ‘leave’ campaign (and so putting it at odds with the Mail on Sunday) and influential football icon (to some) David Beckham confirm his backing for ‘remain’.

Sterling traded as high as 1.478 yesterday (roughly +0.6% on the day) which is actually the highest since January, before weakening from lunchtime onwards to eventually close at 1.466 (-0.31% on the day) following that close outcome from the Survation poll. It’s up about +0.25% this morning. It’s worth noting that since the intraday lows of last Thursday however, the Pound is up an impressive +4.6%. Meanwhile, European equities advanced again although gains were a lot more modest compared to Monday with markets seemingly in more of a consolidation mode. The Stoxx 600 closed +0.70% which puts the three day gain at an impressive +5.84% and the most in ten months. The FTSE 100 was up a lesser +0.36% as that early rally for Sterling created a bit of a headwind. European credit indices ran out of steam a bit meanwhile and finished a touch wider by the close of play.

Across the pond markets were in a similar consolidation mode. The S&P 500 ended up +0.27% with credit indices performing a little better (CDX IG -1.5bps). Fed Chair Yellen’s semi-annual testimony comments were a bit of a sideshow given the overriding focus on the referendum although in truth there was little new or interesting to come out of them. She reiterated further the need for ‘proceeding cautiously’ in raising the federal funds rate to ‘keep the monetary support to economic growth in place while we assess whether growth is returning at a moderate pace’ and whether ‘inflation will continue to make progress toward our two percent objective’. As expected she downplayed reading too much into one or two employment reports while also making mention of other timely indicators of the labour market as looking favourable. Yellen also confirmed ahead of Thursday’s vote in the UK that the Fed will closely monitor what the ‘economic consequences will be and are prepared to act in light of that assessment’.

As we refresh our screens overnight, most Asian bourses are following the lead from Europe and Wall Street yesterday and trading with modest gains. The Hang Seng (+0.35%), Shanghai Comp (+0.45%), Kospi (+0.47%) and ASX (+0.42%) in particular are all up a touch, although markets have moved in lower in Japan (Nikkei -0.44%) with that perhaps reflecting a slightly stronger session for the Yen (+0.30%) this morning. Gold is flat following two days of consecutive heavy falls, while Oil markets are up about half a percent.

Moving on and taking some brief respite from all things Brexit. Yesterday in Germany the Constitutional Court delivered a positive verdict on the constitutionality of the ECB’s OMT by ruling that the complaints have been partly inadmissible and could therefore not be challenged before the GCC. Our European economists noted that the GCC reiterated the conditions mentioned by the ECJ and stated that the German Bundesbank may only participate in the implementation of OMT if these prerequisites are met (for example, limits set at the outset, bonds to be held to maturity only in exceptional cases, etc). Our economists disagree with the view that the German court capitulated. Instead, they saw the conclusion as more constructive given that the two most important constitutional courts in the EU exchanged arguments from a national and European point of view and in the end came up with a consistent opinion on the mandate and actions of a major EU institution.

While we’re on the subject of the ECB, yesterday President Draghi confirmed that the Bank is ‘ready for all contingencies following the UK’s EU referendum’. Draghi added that while it was ‘very difficult’ to predict how the vote could impact markets, he confirmed that ‘we’ve done all the preparations that are necessary now’ and that the Bank stands ready to act if needed.

Changing tack, yesterday we published another Credit Bites (Rating trends still firm but deteriorating) where we tried (for a short while at least) to think of something non-Brexit related to write about. In it we showed how credit fundamentals – as reflected by rating trends – remain in reasonable shape. That said in Europe they have certainly been moving in the wrong direction in recent months. In the US we have seen a more notable downward trend in ratings although this has largely been driven by the energy and natural resources sectors. See the report from yesterday afternoon or emailNick.Burns@db.com if you haven’t got a copy.

Wrapping up the data flow yesterday which was focused solely in Europe, the German ZEW survey for June was the biggest highlight. The data exceeded expectations with the headline current situations print rising 1.4pts to 54.5 (vs. 53.0 expected). Even more impressive was the 12.8pt rise in the expectations component to 19.2 (vs. 4.8 expected) which is the highest level since August last year. Given Thursday’s impending event, the data looks surprisingly upbeat.