Europe: Brexit fears send European shares to lowest since February

[LONDON] European shares fell for a fifth straight session on Tuesday on angst over next week's referendum on Britain's membership of the European Union and uncertainty over the outcome of a two-day US Federal Reserve meeting that starts later in the day.

Swiss money manager GAM Holding dropped 17.9 per cent to a 4-1/2-year low after warning it expects a roughly 50-per cent year-on-year fall in first-half underlying profit before tax, mainly due to lower performance fees.

However, Premier Farnell surged 50 per cent after Daetwyler Holding agreed to buy it in an all-cash offer that valued the British electronic component distributor at just over 1 billion Swiss francs (S$1.4 billion).

The pan-European FTSEurofirst 300 index fell 1.9 per cent to 1.260,14 points, its lowest closing level since Feb. 24. The Stoxx Europe 600 was down 1.9 per cent, while European mining shares fell 3.5 per cent to be the biggest sectoral decliner, tracking weaker metal prices.

The Euro Stoxx 50 volatility index, Europe's main gauge of equity investor anxiety, surged 3.9 points to 38.34, a closing high for 2016. It was at 20 about two weeks ago.

"Brexit concerns are pushing the volatility index higher and particularly hitting financials. This increased volatility is likely to last at least until the referendum," KBC senior economist in Brussels, Koen De Leus, said.

Concerns mounted after the latest poll, by TNS, showed support for the "Leave" campaign had a seven-point lead, adding to a string of surveys that put the Brexit campaign was ahead.

The European banking index was down 2.3 per cent, taking total losses to more than 27 per cent this year. It is the worst performing sector in Europe in 2016.

Uncertainty over the Fed meeting also weighed on markets. The US central bank is widely expected to leave rates unchanged after the much weaker-than-expected May non-farm payrolls report, analysts said.

"Markets will continue to price in a worst-case scenario, meaning further declines are likely in the days ahead except if there would be a substantial shift in public opinion or some kind of verbal intervention from politicians or central bankers to bring back calm into the markets," City of London Markets trader Markus Huber said.

Officials with knowledge of the matter told Reuters that the European Central Bank would publicly pledge to backstop financial markets in tandem with the Bank of England should Britain vote to leave the European Union.

REUTERS