Risk Assets Surge Ahead of UK Referendum Results

US stocks are rallying while Treasurys are selling off across the curve as investors speculate that Britain will choose to remain in the European Union in today’s referendum vote.  The polls close at 10pm BST (5pm EST) and we likely won’t have a solid indication of the final results until 4am BST (11pm EST) at the earliest.  The most recent preliminary polls show the vote neck-and-neck, and there are no exit polls, but trading activity seems to indicate markets are not expecting the Leave vote to prevail.  The pound is currently trading at new highs versus the dollar since December.

Better-than-expected US economic data released today further boosted the market’s appetite for risk assets.  The number of Americans filing for jobless benefits fell the most since February, down to 259,000, close to the 43-year low touched in March.  Claims remained below 300,000 for the 68th straight week, extending the longest streak since 1973.  The healthy claims number suggests labor market conditions aren’t as bad as the May payrolls data indicated, and may lead to a solid rebound for the June NFP.  Other data also painted a favorable view of the US economy, with manufacturing activity increasing to a three-month high, and new home sales up 8.7% from a year ago.
 
All three major US stock indexes are currently trading up close to 1%, while Treasury yields and swap rates are up 3-6 bps across the curve.  Gold is down close to 0.50%, while both WTI and Brent crude are up over 1%.