Global stocks, sterling surge as Brexit momentum weakens in polls

By Edward Krudy

NEW YORK (Reuters) - Global stock indexes jumped on Monday and sterling posted its strongest gain since 2008 after polls showed support for Britain staying in the EU strengthened before Thursday's referendum.

At the start of what could be a frenetic weak for global markets, safe-haven assets such as government bonds and gold retreated. Monday's surge in equities helped Wall Street recover from losses last week, when the chances of the United Kingdom exiting the EU, or "Brexit," appeared to be growing.

The surge in sterling, which rose more than 2 percent against the dollar, coincided with a broad retreat in the greenback as several polls showed the "Leave" campaign weakening. Markets will likely remain volatile and headline-driven in the run-up to the vote, which appears too close to call.

"If I had a seatbelt while watching the markets, I'd put it on," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.

The MSCI's all-country world stock index surged 1.7 percent. Wall Street stocks as measured by the S&P 500 rose 0.6 percent, but closed well off their highs as traders noted the potential for subsequent polls to reverse in favor of "Brexit."

Two polls showed "In" regaining the lead and another showed the "Out" campaign's lead narrowing, though the overall picture was of an evenly split electorate. Bookmakers' odds have shown those wishing to stay in the EU ahead, and Betfair put the implied probability of a vote to "Remain" at 72 percent on Monday, up from 60-67 percent on Friday.

"Everyone is going to hold their breath until Thursday or Friday, when we get to know the result," said Adam Hewison, chief executive of Ino.com in Maryland.

U.S. Treasury yields rose as traders trimmed safe-haven holdings of lower-risk government debt. Benchmark 10-year Treasury yield rose more than 5 basis points from late Friday to 1.671 percent after reaching 1.680 percent earlier Monday.

Gold, another safety play, fell 0.7 percent to just over $1,289 an ounce. It rose 1.5 percent on Friday for its biggest single-day gain since June 3.

The "risk on" move was more pronounced in Europe. The pan-European FTSEurofirst 300 index added 3.7 percent, led by a 4.5 percent rise in banks, while Britain's blue-chip FTSE 100 index chalked up a 3 percent gain.

Sterling rose as far as $1.4707 and was last up 2.3 percent at $1.4684, having hit a two-week low of $1.4013 on Thursday. It soared 2.1 percent to 152.59 yen and 2 percent against the euro to 76.98 pence.

EURO GAINS AS BREXIT WORRIES EASE

The euro, which has suffered due to concern that the United Kingdom's departure could weaken the 28-member bloc, strengthened 0.3 percent to $1.1307, after rising as far as $1.1382.

The yen, often sought by investors in times of market tension, fell 0.2 percent to 103.85 per dollar. The dollar fell 0.6 percent against a basket of currencies.

German 10-year government debt yielded 0.059 percent, up from a record low of minus 0.037 percent on Thursday.

Oil prices, which have also been under pressure, extended Friday's gains. Brent crude topped $50 a barrel for the first time since June 14. It settled on Monday at $50.65, up $1.48 on the day.

(Additional reporting by Shinichi Saoshiro in Tokyo, Anirban Nag, Jemima Kelly and John Geddie in London; editing by Nick Zieminski and Dan Grebler)