Asia, EU shares gain broadly, pound falls on EU exit fears

By Nigel Stephenson

LONDON (Reuters) - Shares rose in Europe and Asia on Monday along with oil and commodity prices, while sterling fell against the dollar and euro on concerns Britain may vote to leave the European Union.

The pound fell 1.5 percent to a three-week low of $1.4175, putting it on track for its biggest daily percentage loss in 11 months, while the euro rose 1.1 percent to 78.17 pence.

London Mayor Boris Johnson, a political heavyweight in David Cameron's ruling Conservative Party, on Sunday defied his leader by saying he would support the campaign to leave the EU in a June 23 referendum.

With dealers expecting choppy trading in the run-up to the vote, the cost of hedging against weakness in sterling hit its highest in more than four years.

"The 'out' camp were struggling to get a figurehead who was popular and Boris has given them that boost," said Alvin Tan, a strategist with French bank Societe Generale in London.

"I think there is genuine worry that Britain might vote to leave and the uncertainty is going to rise into the referendum."

British shares, however, rose, in line with other European bourses. London's resources-heavy FTSE 100 index was up 1.1 percent, though a 4.7 percent fall in HSBC after the bank's 2015 profit fell short of expectations took its toll.

"Brexit is not a story for equities at the moment but that might change.... For sure the probability of Brexit has increased after the positioning of Boris Johnson," said Jurgen Michels, chief economist at BayernLB in Munich.

Ten-year yields on UK government debt rose 2 basis points to 1.44 percent. German 10-year yields, the euro zone benchmark, were flat at 0.2 percent.

European shares extended last week's gains even after surveys of economic activity painted a mixed picture. The pan-European FTSEurofirst 300 index gained 1.2 percent, lifted by miners as the price of oil and other commodities rose.

A survey of private sector business activity showed it increased at its weakest pace in more than a year this month, according to Markit's composite flash Purchasing Managers' Index.

MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.9 percent, having rebounded more than 4 percent last week.

China's benchmark indexes rose 2 percent as investors welcomed Beijing's decision to replace its top securities regulator and on signs the government was stepping up its economic stimulus efforts. [.SS]

Tokyo's Nikkei closed up 0.9 percent, helped by a weaker yen, which fell 0.3 percent to 112.88 per dollar.

The euro fell 0.4 percent to $1.1085, just above last week's low around $1.1064.

RIGS

Oil prices rose as a fall in the number of U.S. rigs was expected to lead to reduced output. Global benchmark Brent crude rose 2.3 percent, or 79 cents a barrel, to $33.79.

Russia and the Organization of the Petroleum Exporting Countries (OPEC) proposed to freeze production at January levels, though analysts said this would not help cut oversupply which has seen prices fall 70 percent since mid-2014.

Copper hit a two-week high on hopes for a revival in Chinese demand. The metal traded up 1.3 percent on the day at $4,680 a tonne.

Gold fell as stocks and the dollar rose. It was at $1,207 per ounce.

(Additional reporting by Saikat Chatterjee in Hing Kong, Patrick Graham and Anirban Nag in Londn and Danilo Masoni in Milan; editing by John Stonestreet)