Europe midday: Stocks nudge up in cautious trade ahead of Brexit vote

European stocks edged tentatively higher on Wednesday, with investors likely cautious a day ahead of Britain’s referendum on EU membership.

At midday, the benchmark Stoxx Europe 600 index was up 0.2%, Germany’s DAX was 0.6% higher and France’s CAC 40 was up 0.4%.

At the same time, oil prices advanced, with West Texas Intermediate up 0.8% at $50.25 a barrel and Brent crude 0.6% firmer at $50.93. At 1530 BST, the US Energy Information Administration will release its weekly crude oil stockpiles report.

Rebecca O’Keeffe, head of investment at Interactive Investor, said: “Although the poll predictions are still making the EU referendum results too close to call, global equity markets have maintained their positive Remain stance over the past few days and this has continued in European trade today, with equities pushing further forward.

“With less than 24 hours before voting starts, markets are now pricing in virtually no risk of an exit vote, which begs the question as to whether the euphoria is being overdone and how much upside still exists for investors, or whether this is irrational exuberance and investors are ignoring the risks?”

UBS strategist Yianos Kontopoulos said that given the risk-rally of the last few days, there is significant room for downside in the event of a Leave vote.

“We estimate percentage moves in the mid-teens for UK and EU equities but materially smaller moves for the S&P 500 and EM equities. While GBP may come under significant pressure, the EUR may be more stable.”

In a Remain scenario, outside European and UK stocks – where a significant relief rally is likely – Kontopoulos expects much less pronounced moves across assets.

“In equities, we think the S&P 500 could reach new highs, albeit near-term no more than 1-3% higher than current levels. Fundamental pressures limit the potential upside in global bond yields. Yields could rise more for core euro-area bonds, which look the most expensive. We also see limited upside across EM assets (except perhaps local currency bonds). Interestingly, we believe the potential sell-off in gold in a Remain scenario would be small relative to the upside potential in the opposite case.”

In corporate news, Swedish retailer Hennes & Mauritz rose despite reporting a 17% decline in second-quarter profit.

In London, FTSE 250 department store chain Debenhams was sharply lower after it said like-for-like sales fell in the third quarter and warned gross profit margins could be flatter than previously thought.

There are no Eurozone data releases of note due, but investors will turn their attention once again to Federal Reserve Chair Janet Yellen as she delivers the second part of the her two-day testimony before Congress after she reiterated a cautious approach to hiking rates on Tuesday.