World stock markets fell while the safe-haven yen firmed on Monday amid concerns that Britain may be on the verge of voting to leave the European Union in a referendum that is two weeks away.

Uncertainty over the outcome of this week's policy meeting of the US Federal Reserve added to the cautious tone.

Though traders predict the US central bank will not raise interest rates this week, investors will be looking for clues about when the Fed might may make a rate move.

'Brexit'

A vote by Britain to leave the 28-member EU, dubbed "Brexit,” could tip Europe back into recession, putting more pressure on the global economy. Britain's “Out” campaign widened its lead over the “In” camp ahead of the country's June 23 referendum, according to two opinion polls published by ICM on Monday.

“Brexit would present the first formal challenge to the current global economic order and could spark a much wider and more dangerous fracture of the European Union,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.

The euro dropped to its lowest level against the yen since February 2013. It was last at 119.88 yen, down 0.4 per cent. Sterling, which was down broadly, fell to a three-year low against the yen, at 149.50 yen. The pound last traded down 0.9 per cent at 151.04 yen.

US stocks ended lower for a third straight session as investors braced for the Fed meeting and Britain's referendum.

“I think the market is nervous about higher interest rates and frankly about maybe the US economy not being able to get over that last hump to a full recovery,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa.

Shares of Microsoft fell 2.6 per cent after the company announced it would buy online networking company LinkedIn for $26.2 billion in its biggest-ever deal.

The Dow Jones industrial average was down 132.86 points, or 0.74 per cent, to 17,732.48, the S&P 500 lost 17.01 points, or 0.81 per cent, to 2,079.06, and the Nasdaq Composite dropped 46.11 points, or 0.94 per cent, to 4,848.44.

European shares fell to their lowest level in more than three months, hit by the unease over Britain's possible exit from the EU. The FTSEurofirst 300 closed down 1.9 per cent.

Treasury yields

US Treasury yields fell to a four-month low as investor risk appetite ebbed. Sovereign debt yields in developed markets around the globe fell to all-time lows.

US benchmark 10-year notes rose 7/32 in price to yield 1.616 per cent, after earlier falling to 1.608 percent, the lowest level since February 11. Ten-year yields in Germany remained near zero, close to record lows.

Oil prices ended down, pressured in part by global economic concerns. Brent crude oil futures fell 19 cents, or 0.4 per cent, to settle at $50.35 per barrel, while US crude futures also declined, falling 19 cents to settle at $48.88.

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