* Polls show "Remain" leading before Thursday's UK vote
* Sterling touches 2016 high, European shares climb
* Investors remain cautious as UK voters closely divided
* Various market volatility gauges flash amber
By Marc Jones
LONDON, June 23 (Reuters) - Sterling climbed to a 2016 high
and world stocks rose for a fifth day running on Thursday, as
British voters headed to the polls for a referendum on their
European Union membership.
Financial markets have been racked for months by worries
about what Brexit would mean for Europe's stability, but the
latest opinion polls show the "Remain" camp holding a small lead
providing some comfort.
The pound, which has been the lightning rod for opinion on
the EU referendum throughout the six-month campaign, was up 1
percent at $1.49 GBP=D4 as traders cut their bets on
volatility after the vote. GBPVOL=
Equity markets followed suit. London's FTSE .FTSE jumped
1.6 percent and Germany's DAX .GDAXI and France's CAC 40
.FCHI surged 2.3 percent.
Wall Street was expected to open up much as 1 percent and
MSCI's 46-country All World index was at its highest in almost
two weeks .MIWD00000PUS .
"You look at the markets and they expect a `Remain' win.
Cable (sterling/dollar) at $1.49 this morning tells you it all,"
said Societe Generale (PA:SOGN) FX strategist Alvin Tan.
With the polls still tight and having proved unreliable in
Britain's general election last year, caution remained however.
Share trading across Europe was just a third of its normal
level. Trading in Britain's FTSE .FTSE was two-thirds lower
than average, Reuters data showed. (http://amers2.apps.cp.extranet.thomsonreuters.biz/apps/equities?st=Menu+G+C&s=GEQ03+AP+7Z&grviewsurl=GzEQxOV#/Explorer/GzEQzINDICESxOV?s=GEQ04%2BAP%2B7Z)
Elsewhere, Norway's crown NOK= jumped to a 10-day high as
its central bank kept interest rates steady
Traders were also digesting June's euro zone PMI data. They
showed a slowdown in service industry growth more than offset
greater manufacturing activity.
That came a day before the results of the take-up for the
European Central Bank's recently revamped long-term loans. It is
now effectively paying banks to lend the cash they take on to
the euro zone's firms and consumers.
Greek bonds GR10YT=TWEB got only a modest lift after the
ECB said on Thursday it would accept them as loan collateral
again but would only "examine" adding them to its 1.7 trillion-
euro asset-buying programme.
(Latest Reuters news on the referendum, including full
multimedia coverage: SO VOLATILE TIMES
In the United States, weekly jobless claims data will help
fill the wait until the Brexit results, which are not expected
until a few hours before European markets open on Friday.
Overnight, Asia .MIAPJ0000PUS had nudged up a modest 0.3
percent. A drop Chinese markets was offset by a gain of nearly 1
percent for Tokyo's Nikkei .N225 .
Before the British vote, exchanges, market regulators and
banks moved to tighten risk-management systems.
Singapore's stock exchange SGXL.SI said it has raised the
amount of cash companies must pledge to cover trading positions
Central banks have said they stand ready to pump in emergency
cash
"Most people at this point expect a rise in the market,"
anticipating Britain will vote to stay in the EU, said Isao
Kubo, an equity strategist at Nissay Asset Management. "But you
never know, and it will be clear by tomorrow, so you don't want
to take new positions now."
The Brexit uncertainty kept safe-haven government bonds
firm. Ten-year German and Japanese bonds were yielding 0.05
percent DE10YT=TWEB and 0.13 JP10YT=RR percent respectively
compared with 1.33 percent for British Gilts and 1.70 percent
for U.S. Treasuries US10YT=RR .
Elsewhere, the mood seemed less cautious. The main market
"fear-gauge", the VIX volatility index .VIX , dropped the most
in a month as safe-haven gold XAU= fell to a two-week low of
$1,260 an ounce. GOL/
Demand also faded for another safe haven, the yen. The
dollar jumped more than a full yen to 105.74 yen JPY= and the
euro gained more than 2.5 percent to 120.67 yen in its biggest
jump since December EURJPY= .
The euro zone currency also climbed against the dollar,
briefly breaking $1.14 EUR= . That pushed the dollar index,
which tracks the U.S. currency against six rival currencies,
down 0.5 percent. .DXY .
"Everybody is a bit shell-shocked at the way the market has
moved so aggressively (towards Britain remaining in the EU),"
said Saxo Bank's head of FX strategy John Hardy.
"If you are stuck with a short position, you are being
forced out without even knowing the result, but what this also
means is that a Brexit result is now a catastrophic risk."
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Global assets in 2016 http://reut.rs/1WAiOSC
European exchanges in 2015 http://link.reuters.com/pap87v
Currencies in 2016 http://link.reuters.com/tak27s
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