European stocks fall to lowest level in 4 months

European stocks fell on Thursday, with regional equity indexes dropping towards their lowest level in nearly four months as concerns lingered over Britain’s vote next week on its European Union membership.

The pan-European STOXX 600 index fell 1.4 per cent, while the European FTSEurofirst 300 index declined 1.3 per cent.

Both those indexes were near four-month lows and resumed a losing streak after markets rebounded slightly on Wednesday.

Shares in UBS and Credit Suisse fell more than 2 per cent, after the Swiss National Bank (SNB) said those two banks would likely each need to raise an extra 10 billion Swiss francs ($10.4 billion) in capital to meet new leverage requirements.

Other European bank stocks also underperformed, with Deutsche Bank briefly touching a record low as it fell 2.2 per cent.

The SNB said a possible British exit from the European Union in the vote next week, dubbed “Brexit’’, was a major global economic risk, echoing a similar view from the US Federal Reserve late on Wednesday.

Although betting odds still point to Britain deciding to stay in the EU, opinion polls have shown growing support for the “Leave” campaign backing a Brexit.

“Brexit is becoming a lot more likely than initially expected and the market is indeed becoming more fearful. It is very much a binary event and until then buying dips and selling rallies seems the sensible idea,” said Hampstead Capital hedge fund manager Lex Van Dam.

European stocks also tracked similar weakness on US and Asian markets.

US stocks fell on Wednesday, with the US Federal Reserve having lowered its economic growth forecast and signalling it still planned two rate increases this year, even though the Fed put off an immediate rate hike.

Fed Reserve Chair Janet Yellen acknowledged that Britain’s possible exit from the European Union was one of the factors in the latest rate decision, saying the June 23 referendum would have “consequences for economic and financial conditions in global financial markets’’.

The Fed’s decision to keep rates on hold pushed up gold prices, with shares in gold miner Randgold rallying 3.3 per cent.

Gold is a non-interest bearing asset, and its relative appeal is enhanced when the Fed decides against raising rates, while its safe-haven status is boosted in times of economic uncertainty.

Some traders saw the rising gold price as another sign of mark worries such as those over Brexit.

“The rising gold price is another one of the flashing red light signals coming up on the market,” said Rupert Baker, a European equity sales executive at Mirabaud Securities.

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