Defensive assets lose shine as Brexit calm prevails

Defensive-assets gold, government bonds, the yen and Swiss franc gave up some of their recent bull gains as a blanket of calm settled over the always polarising and at times acrimonious Brexit debate.

Campaigning for next week's referendum on whether the UK should quit the European Union has been suspended for a second day out of respect to murdered Labour MP Jo Cox.

"One of the triggers for the change in market sentiment appears to be the suspension of Brexit campaigns following tragic killing of MP Jo Cox," said Jasper Lawler, market analyst at CMC Markets.

At 13:57 BST, sterling was up 0.53% to 148.876 yen, and up 0.23% at 1.3737 Swiss francs. Gold was down 0.48% to $1,292.2 an ounce. On the bonds front, UK 10-year gilt yields rose 1 basis point (bp) to 1.12%, while German 10-year Bund yields gained 2 bps to 0.00%.

The yen, Swiss franc, UK gilts, German bunds and gold have hit record levels in recent days as nervy traders fled towards these safe havens on pronounced fears UK would vote to leave the European bloc on 23 June.

An increasing number of polls had suggested a Brexit outcome was gaining traction, and even a more likely outcome than Bremain. Today, Morgan Stanley said the probability of a Bremain win now stood at 55%, based on the expectation of a late swing in the polls.

Accendo Markets head of research Mike van Dulken said Brexit fears appeared to have receded today.

He said this was on the assumption that Bremain-supporter Cox's senseless murder, and suspension of Brexit campaigning, would "result in a swing back to Remain (in the EU) that can overcome the lead that the Leave camp has taken in recent polls."

Lawler, meantime, observed that the campaigning suspension meant the Brexit debate could temporarily move to the sidelines.

"Fear-based trades (of a Brexit vote next week) sent markets to extreme levels in a short space of time and (today) they have snapped back," he said.

Markus Huber, a trader at City of London Markets, added that whilst sentiment had undergone "somewhat of a shift in the past 24 hours" it was too early to draw a definitive conclusion on what it all meant.

"With more polls being released in the next few days volatility is likely to tick higher once again as we are approaching next Thursday."

Cox, aged 41 and a keen campaigner for UK to remain in the EU, was gunned down in her Yorkshire constituency of Batley and Span yesterday. She died shortly after.