FTSE 100 could gain 14% from current levels if UK votes Remain, Morgan Stanley says

The probability of a vote to Remain in next week’s EU referendum stands at 55%, according to Morgan Stanley, based on the expectation of a late swing in the polls.

In this event, which is the bank’s base case, it expects to see a stock rally that could push the FTSE 100 up 14% from its current level.

The FTSE 100 could move up to a range of between 6,500 and 6,800 in the case of a Remain vote – the top end of which would be a rise of around 14% from current levels. However, should voters back the Leave campaign, the index could move down to between 5,000 and 5,300.

For the FTSE 250, Leave would result in a move down to 13,500-14,350, while Remain would spark a move up to 17,700-18,500.

As far as the Stoxx 50 is concerned, a vote to Leave would move the index down to around 2,400 to 2,550 while Remain would see a move up to 3,150-3,300.

MS pointed out that with European indices further below their three- and six-month averages than UK indices – perhaps reflecting concerns over political contagion into Europe or an expectation that a weaker pond would limit downside for UK indices – it is possible European stocks will rally harder than UK equities in the event of a Remain vote.

If the UK votes to stay in the EU, the MSCI Europe could rally 5%-10%, although a drop of between 15% and 20% might ensue in the case of a Brexit scenario.