On the day voting for the UK referendum finally began, what started off as a trading session with a modest upward bias, promptly turned into a buying orgy in painfully illiquid markets shortly after Europe opened as an influx of buy orders pushed European stocks 2% higher, propelled by cable which was above 1.49 for the first time since December and USDJPY climbing over 1.05 in sympathy, following the release of the final Ipsos Mori poll which showed Remain at 52% to 48% for leave.

The final poll breakdown is as follows, and shows a lead for Remain based on phone polls and a slight lead for Leave from online polls.

One look at the chart of cable shows that as far as the FX market is concerned at least the outcome is now sealed.

Then again, with all polls largely in the margin of error, predicting a victory for Remain may be premature: ““Some cash is returning to markets, but I would rather stay put until the results. You can’t really rule anything out before tomorrow,” said Thomas Thygesen, SEB AB’s head of cross-asset strategy in Copenhagen. “The issue will be how the outcome is perceived and how the biggest stakeholders react. Even just the absence of bad news may be the start of a risk rally, and markets have been rising in the anticipation of this.

The MSCI All-Country World Index hit a two-week high, rising 0.7% in early trading, with above-average trading in shares on Europe’s benchmark, amid a vote that past opinion polls indicated was too close to call. A gauge of sterling advanced for a second day, while a measure of implied overnight price swings versus the dollar climbed to a record. The U.S. currency weakened versus all of its major peers except the yen. The Mexican peso and Russia’s ruble led gains among oil-exporting nations as crude advanced. The cost of insuring high-yield corporate debt against default fell for a fifth day, the longest run since April. U.S. Treasuries dropped as Spanish and Italian notes rose.

Needless to say, investors have been glued to the U.K.’s debate on EU membership in recent weeks as governments and central banks around the world warned that a vote for a so-called Brexit could hurt global economic growth and destabilize financial markets. As Bloomberg writes, a gauge of expected volatility in U.S. stocks jumped to its highest level since February ahead of the referendum.

The Stoxx Europe 600 Index also rose for a fifth day, surging 1.3 percent, with miners leading a rally of all industry groups. The volume of shares changing hands on the European index was about 29 percent higher than the 30-day average. Britain’s benchmark FTSE 100 Index advanced 1.2 percent. Voters have until 10 p.m. to cast their ballot in the referendum on EU membership. The first results are expected around midnight, while the final ones are due at about 7 a.m. on Friday. Polls published over the last three days suggested the vote will be finely balanced between the two camps. Futures on the S&P 500 added 1.1 percent and were flirting with the 2,100 level.

Aside from the Brexit vote, investors will also look data on jobless claims, manufacturing and new home sales for indications of the health of the world’s biggest economy and the possible trajectory of interest rates.

Market Snapshot

• S&P 500 futures up 0.9% to 2097
• Stoxx 50 up 2.0% to 33036
• FTSE 100 up 1.6%.35 to 6358
• DAX up 1.9% to 10261
• German 10Yr yield down less than 1bp to 0.06%
• Italian 10Yr yield down 3bps to 1.41%
• Spanish 10Yr yield down 2bps to 1.48%
• S&P GSCI Index up 0.2% to 377.6
• MSCI Asia Pacific up 0.8% to 131
• Nikkei 225 up 1.1% to 16238
• Hang Seng up 0.4% to 20868
• Shanghai Composite down 0.5% to 2892
• S&P/ASX 200 up 0.2% to 5281
• US 10-yr yield up 2bps to 1.71%
• Dollar Index down 0.34% to 93.4
• WTI Crude futures up 0.5% to $49.38
• Brent Futures up 0.6% to $50.20
• Gold spot up 0.3% to $1,270
• Silver spot up 0.9% to $17.43

Top Global News

• Final Brexit Appeals Made as Polls Diverge on Referendum’s Eve: ComRes survey late Wednesday shows Remain ahead, boosts GBP
• Pound’s Day of Destiny Arrives as History Shows What’s Possible: Liquidity biggest problem after a leave vote: Insight
• VW Owners Split for First Time on Diesel Scandal in AGM Vote: Lower Saxony abstains from ratifying executives’ actions
• House Republicans Leave Town as Democrats Extend Gun Sit-In: Democrats say protest will continue until votes are scheduled
• Mylan Says Indian Drug Industry Needs More Transparency From FDA: Mylan has ‘moved on’ from Perrigo bid, President Malik says
• Caesars Creditors to Vote on Plan, But Confirmation Fight Awaits: Company still seeking deal to avoid risky court battle
• Twilio Raises $150m Pricing IPO Above Marketed Range: San Francisco-based company priced 10m Class A shares at $15 each
• BofA Said in Talks to Settle With SEC for $400m-$450m: WSJ: Settlement may be announced as soon as Thursday
• China’s Sanpower Says It Joins Bids for McDonald’s China Rights: Sanpower submitted joint bid with Beijing Tourism Group

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Looking at regional markets, Asia stocks traded mixed as all focus remained on today’s UK referendum. Nikkei 225 (+1.1%) and ASX 200 (+0.2%) were supported at the open, alongside gains in US equity futures after the release of Comres and YouGov polls which showed the Remain campaign jumped ahead. However, gains were capped as cautiousness still persisted and as Chinese markets entered the fray, with the Shanghai Comp (-0.3%) negative on continued debt concerns and after the PBoC reduced the size of its liquidity injections. Finally, 10yr JGBs were pressured as the risk-on sentiment in Japan restricted flows into the safe-haven, although prices were lifted off worst levels following a 20yr bond auction with had a better than prior b/c.

Top Asian News

• China Is Said to Be Satisfied With Yuan Exchange-Rate Reform: Premier Li visited PBOC, China Construction Bank on Monday
• Stealth China Stimulus Means Fiscal Gap Over 10%, Economists Say: As private businesses tighten belts, govt is stepping in
• Japan Negative Rates Drive Biggest Lenders From Overnight Market: 3 of 5 largest say minus rates complicate call funding
• China’s State Grid Said in Talks to Buy CPFL Energia Stake: Camargo Correa’s stake in CPFL Energia is ~23.6%
• World’s Biggest Pension Fund Sues Toshiba for Accounting Scandal: Japan’s GPIF is seeking damages of ~900m yen
• Arora’s Walkout Returns the Focus to Japan Inc. Succession Woes: SoftBank transition hiccup latest of many such cases
• Toshiba’s President Tsunakawa Warns of Long Road to Recovery: Toshiba is recovering from a multiyear accounting scandal

European equities have traded solidly in the green with little in the way of fundamental newsflow, while in terms of the FTSE 100 that has been led by material names amid the upside in the commodity complex, coupled with strength in Tesco’s (+2.3%) following a firm sales report. Elsewhere, credit markets are relatively flat with the German yield seeing some curve flattening amid the outperformance in the long end. The Stoxx Europe 600 Index also rose for a fifth day, surging 1.3 percent, with miners leading a rally of all industry groups. The volume of shares changing hands on the European index was about 29 percent higher than the 30-day average. Britain’s benchmark FTSE 100 Index advanced 1.2 percent. Voters have until 10 p.m. to cast their ballot in the referendum on EU membership. The first results are expected around midnight, while the final ones are due at about 7 a.m. on Friday. Polls published over the last three days suggested the vote will be finely balanced between the two camps.

Top European News

• Tesco Turnaround Gains Pace as Lewis Quietens Brand Doubters: Sales increase marks another step in CEO’s turnaround efforts
• Norway Keeps Rates at Record Low as Oil Crisis Battering Abates: Lifts rate outlook, still sees one more rate cut in 2016
• When Ports Finally Ditch Fax Machines, Cargotec Plans to Profit: Company bets software will replace outdated technology
• French Output Declined for First Time in Four Months in June: Private-sector economy shrank for the first time in four months
• Statoil Saves $292m Cash as Investors Take Scrip Dividend: Analysts predicted a majority if investors would choose shares
• Credit Suisse Said to Face U.S. Probe on Israel Client Taxes: Probe looking at whether bank helped clients evade U.S. taxes
• CDC Advises Against Using AstraZeneca’s FluMist Next Season: Panel found not effective enough in last 3 influenza seasons

In FX, the pound rose to over $1.4900, its strongest level since December. The Bloomberg British Pound Index, which tracks sterling against a basket of peers, gained 0.6 percent. The currency has strengthened about 3 percent versus the dollar this week. “Even though it looks as though much of the ‘risk of Brexit’ has been priced out of markets, there remains plenty of scope for volatility on either outcome, albeit very much more on a ‘Leave’ than ‘Remain,’” Ray Attrill, global co-head of foreign-exchange strategy in Sydney at National Bank Australia Ltd., wrote in a note. An overnight measure of pound-dollar volatility surged as traders sought protection from unusual price swings. The gauge, based on option prices, touched 119.7 percent Thursday, the highest since Bloomberg began collecting the data in 1998.

The euro appreciated 0.7 percent, while Sweden’s krona gained 1.1 percent. Mexico’s peso gained 1.3 percent and the ruble climbed 1.1 percent. Taiwan’s dollar rose to its strongest level since August after overseas investors pumped $2.4 billion into the island’s stocks this month. The yen weakened 0.4 percent against the dollar and slid for a fifth day versus the euro, its longest losing streak since March. The Bloomberg Dollar Spot Index dropped 0.5 percent. The MSCI Emerging Markets Currency Index advanced 0.3 percent to a seven-week high. Five days of progress have pushed it up 1.6 percent. Mexico’s peso, South Africa’s rand and Russia’s ruble led gains.

In commodities, West Texas Intermediate for August delivery gained as much as 77 cents to $49.90 a barrel on the New York Mercantile Exchange and was at $49.66 at 10:50 a.m. London time. The contract lost 72 cents to $49.13 on Wednesday. Total volume traded was about 35 percent below the 100-day average. Gold swung between gains and losses near a two-week low, having retreated 2.5 percent over the last three days. Nickel and zinc fell, while copper climbed 0.8 percent.

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Bulletin Headline summary from Bloomberg and RanSquawk

• GBP rises to 2016 highs with the latest Polls from YouGov, ComRes and Ipsos Moris showing `remain’ ahead.
• Equities higher this morning, however newsflow has been somewhat light with focus firmly on the EU referendum.
• As well as the UK’s EU referendum, today will see the release of US manufacturing PMI, Weekly Jobless Claims and New Home Sales.
• Treasuries sell off overnight as global equities, commodities, precious metals and the GBP/USD rally; U.K. votes on Brexit, polls open until 5pm NYT with final results due ~2am NYT tomorrow morning.
• Across Europe, traders and their employers are making preparations for a big night. It promises to be a record- setting evening, whether in terms of trading volatility or in gallons of coffee consumed
• Bond and currency traders seeking refuge as the U.K. votes on membership in the European Union may find that the world’s financial-market havens aren’t so safe
• Growth in the euro area’s private sector slowed more than economists predicted in June, with firms expressing concerns about uncertainty ahead of the U.K.’s vote on its European Union membership
• The European Central Bank reinstated a waiver on Greek debt, allowing the nation’s banks more access to cheaper refinancing lines but stopping short of including such bonds in quantitative easing for now
• A majority of Japan’s biggest private lenders are still unwilling to borrow from the market for overnight loans almost six months after the Bank of Japan announced its negative interest-rate policy

DB’s Jim Reid concludes the overnight wrap

Let’s take a look at the latest and last polls before the ballot boxes open. On this front it was a good day yesterday for ‘leave’ until the two 10pm polls both showed ‘remain’ in the lead. Opinium released their last poll (online) yesterday afternoon showing ‘leave’ 1% in the lead at 45/44%. That came at the end of the European session and a couple of hours later the TNS poll (online) showed ‘leave’ 2% in the lead at 43/41%. The sample periods for those were June 20th-22nd and June 16th-22nd respectively.

Then after the US close we got the ComRes phone poll (survey period June 17th-22nd) for the Daily Mail and ITV News which showed a 6% lead for ‘remain’ at 48/42%. After accounting for the don’t knows this extended to an 8% lead for ‘remain’ at 54/46%. Finally and a short moment after that ComRes poll, the YouGov online poll for the Times (survey period June 20th-22nd) showed ‘remain’ 2% in the lead at 51/49%. This also adjusted for the don’t knows. The FT’s poll of polls is now sitting at 47% vs. 45% in favour of ‘remain’ after accounting for the 4 polls yesterday.

Up to last night, of the most recent 8 polls, 3 out of 5 online surveys have given ‘leave’ the lead and all 3 phone equivalents have ‘remain’ in front.

Outside of the online/phone polling accuracy debate, the greatest level of intrigue will be to see whether the pollsters generally or bookmakers have been the more accurate in the build-up. As we highlighted last week, there seemed to be either a late swing or error in polling that underestimated the support for the ‘remain’ movement in the Quebec/Scottish referendums. Figure 1 in the PDF today updates that chart for the latest Brexit polling numbers.

After a big wobble last week, markets in our opinion are now more pricing in probabilities closer to the bookmakers assessment. There should be caution in over interpreting the bookmaker numbers as betting odds reflect the weight of money staked rather than a prediction. Clearly there could be some hedging involved here which would distort its predictive powers.

As for the timeline after polls close (2200 BST), the first thing to note is that there will be no official exit poll. An Ipsos Mori telephone poll for the Evening Standard is due to be released at some stage today (possibly before polls open) while a YouGov poll is due to be announced after polls close this evening.

The YouGov sample is exclusively taken from today, with the former compiled earlier in the week.

It is said that several city institutions have commissioned their own private polls so it’ll be interesting to see whether these see the light of day. The trading in Sterling might give clues as to whether notable news has been derived from these polls. Overall I’d imagine the YouGov poll (released on Sky) will get most attention post-2200 tonight although we note it’s an online poll. Next thing to look for is turnout. The number of voters in each area is compiled before counting. So we should get an idea on turnout before the first results (perhaps due at around 0030 Friday – see below). The UK Electoral Commission has estimated that most will come through between 2330-0230.

DB’s George Buckley has argued that the ‘leave’ vote appears more passionate and is likely to be more incentivized to vote. A low turnout number could therefore favour them. The last General Election (May 2015) saw a 66% turnout but the Scottish referendum saw 85%. The 1975 EEC UK referendum saw just under 65%. It’s impossible to work out at what number the pendulum shifts in favour of ‘remain’ (if indeed it does) but maybe last year’s General Election is a baseline figure. Given the phenomenal media interest, on balance I’d be surprised if it wasn’t higher. As George Buckley reminded me yesterday, in 1975 we’d only been a member of the EEC for a couple of years so surely this is a more momentous vote with more at stake either way?

Next are the all important first results and how to handicap them. The first results are expected around 0030 BST (Sunderland first perhaps) with 50% likely available by 0400 and 80% by 0500. Figure 2 in the PDF shows the likely cumulative % declaration by time. In terms of interpreting the results DB’s Jack Di-Lizia has produced an interesting graph (Figure 3 in today’s PDF) showing the likely declaration results timings against level of euroscepticism in that area. The lower this number the greater the level of euroscepticism. This index was compiled using Sky who ranked each area of the country. As a word of warning this was done in March before the recent swing towards ‘leave’ and the regions may not exactly map the count areas. However as can be seen from the moving average, the initial results may favour eurosceptic  areas before it becomes more random as we approach 0200. YouGov has also issued numbers for eurosceptism and DB’s George Buckley has compiled a list of areas that report before 0300 and show similar numbers for Sky and YouGov (to confirm the trend). He sees these as interesting ones to watch.

As we swing over to markets, its FX which has seen the greatest volatility over the past 24 hours or so. Sterling touched an intraday high yesterday in the mid-afternoon at 1.477 (roughly +0.84%) prior to the release of the first two polls which showed ‘leave’ having the advantage. Following those polls that gain was completely wiped out. However, following the release of the two late polls showing ‘remain’ in the lead, the Pound surged +1.30% and touched an intraday high late last night of 1.484. Believe it or not that’s actually the highest level this year (and since December 28th) and while it’s come off a little in Asia, it’s still holding around 1.480 this morning.

Meanwhile the implied probability based on political bookmaker’s odds is sitting at 79.9% this morning. That comes following a slightly greater than 5% range yesterday which saw the probability get as low as 75.5% and as high as 80.9%. As a reminder those odds have been as low as 61% earlier this month and as high 85% back in May.

At the margin, sentiment is probably just about on the positive side in Asia this morning. While bourses in China and Korea are lower, the Nikkei (+0.48%), Hang Seng (+0.38%) and ASX (+0.18%) are all up modestly, while US equity index futures are up half a percent or so and EM currencies are also up a similar amount. Credit markets in Asia and Australia are also 4bps and 2bps tighter respectively.

The moves this morning come after markets finished a little more mixed yesterday. The Stoxx 600 was up as much +1.00% or so an hour out from the close, before paring alot of that to close at +0.38% following the release of the Opinium poll. The FTSE 100 closed +0.56% but had also been up as much +1.40%. That said the FTSE is still up an impressive +6.13% from the intraday lows of last Thursday (which was the lowest level since February). Indeed that has also occurred despite Sterling being up +5.47% in the time frame so the gains would be perhaps even more had it not been for that headwind.

Meanwhile across the pond the S&P 500 was out with an early gain of +0.51% before then mirroring a similar dive lower. The index closed -0.17% by the final whistle with volumes nearly 15% lower than the average. Measures of volatility rose meanwhile. The VSTOXX was up 5% and at 36 is just below the 40 level of a week ago which was the most since August last year. The VIX rose 15% to close above 21. That takes it just above last week’s high although it’s still a way off the high of 28 it made during February.

Elsewhere, there wasn’t too much to report in rates markets. 10y Gilts edged up a few basis points to 1.310%, Bunds were a basis point higher at 0.060% and peripherals were a touch stronger. 10y Treasuries were 2bp lower but have risen by the same amount this morning so continue to hover around 1.707%. In the commodity space Gold (-0.15%) edged down marginally, while Oil (-1.44%) was also weaker after US inventories fell by less than expected last week.

Probably the most interesting non-referendum newsflow came from the ECB and Greece yesterday after the Central Bank announced that it is reinstating the waiver on Greek debt and so allowing them to be used as collateral to access ECB loans. An associated statement from the ECB said that the Governing Council has acknowledged the commitment of the Greek government to implementing the current ESM program and that it expects continued compliance with its conditionality. On a similar subject, a reminder that on Friday we should be getting the details of the first set of data on the take up on TLTROII.
Wrapping up yesterday’s data flow. In the US we learned that existing home sales rose +1.8% mom in May as had been expected. The FHFA house price index revealed a lower than expected +0.2% mom rise in April however (vs. +0.6% expected). Meanwhile, close to home the consumer confidence reading for the Euro area in June weakened a tad to -7.3 from -7.0 in May. Expectations had been for no change

As we turn to the day ahead clearly markets will be firmly fixed on events in the UK. For completeness however, the rest of the day will also see the release of the flash June global PMI’s. In Europe we get the full set of manufacturing, services and composite data while in the US we just get the manufacturing reading. Also due out across the pond is initial jobless claims data, new home sales for May (expected to fall sharply), conference board’s leading indicators (expected at +0.1% mom) and Kansas City Fed’s manufacturing activity index. The Norges Bank monetary policy meeting is also today (no change expected). Clearly all of this is a bit of a side event however.

See you on the other side!!