European shares extend rally but caution over Brexit remains

MILAN/LONDON: European shares rose on Tuesday as worries that British would choose to leave the European Union eased, although caution prevailed over what is expected to be a close vote.

The latest opinion poll showed that the campaign for Britain to remain in the EU had a one-point lead over the rival "Leave" camp, although its edge had narrowed before Britain votes in Thursday's referendum on its EU membership.

The Pan-European FTSEurofirst 300 and the STOXX Europe 600 indexes both gained 0.7 after surging the previous day by nearly 4 percent, to reach their highest intraday point since June 10.

The bounce follows losses last week, when the two indexes fell to four-month lows on concern that "Leave" would win.

"Confidence is high for `Remain', but markets may be underestimating the chances of Brexit," said Joe Rundle, head of trading at ETX Capital.

Analysts at UniCredit said although opinions polls suggested the result would be close, they expected "Remain" would win, fuelling further gains for European equities, especially financial stocks.

Most sectors ended higher on Tuesday. Banks, which have been the biggest losers so far this year, and insurers were among those gaining the most, rising around 1.2 percent.

Nordea bucked the trend to fall 1.3 percent after a report in a Swedish newspaper raised worries over capital needs at the Nordic region's biggest bank.

Mining companies fell 0.4 percent but came off earlier lows, as metal prices recovered from earlier losses caused by concern about global oversupply.

Whitbread rose 1.7 percent after reporting sales grew 8 percent in the first quarter and saying it remained confident of making good progress for the full year.

Bouygues rose 1.4 percent after Kepler Cheuvreux double upgraded the French construction and telecom conglomerate to "buy" from "reduce", saying that valuations had become attractive again.