June 14, 2016 / 2:52 PM / in 2 years

European shares sink to new three-month low, GAM plummets

(ADVISORY - Reuters plans to replace intra-day European and UK stock market reports with a Live Markets blog on Eikon - see cpurl://apps.cp./cms/?pageId=livemarkets for site in development. See the bottom of the report for more details) Updates prices)

* FTSEurofirst 300 index down 1.3 percent

* GAM slumps after profit warning

* Volatility index surges to four-month high

* ECB seen pledging to backstop markets after a Brexit

By Atul Prakash and Danilo Masoni

LONDON/MILAN, June 14 (Reuters) - European shares fell for a fifth straight session on Tuesday, with investors anxious about next week’s referendum on Britain’s membership of the European Union and the Federal Reserve’s two-day meeting starting later in the day.

Swiss money manager GAM Holding dropped 18 percent to a 4-1/2-year low after warning it expects a roughly 50 percent year-on-year fall in first-half underlying profit before tax, mainly due to lower performance fees.

However, Premier Farnell surged 50 percent after Daetwyler Holding agreed to buy it in an all-cash offer that valued the British electronic component distributor at just over 1 billion Swiss francs ($1 billion).

The pan-European FTSEurofirst 300 index fell 1.3 percent by 1417 GMT after earlier hitting a fresh three-month low.

The STOXX Europe 600 was down 1.4 percent, while European miners fell 2.1 percent, the top sectoral decliner, tracking weaker metals prices.

The Euro STOXX 50 volatility index, Europe’s main gauge of equity investor anxiety, surged to a four-month high of 36, against 20 about two weeks ago.

“Brexit concerns are pushing the volatility index higher and particularly hitting financials. This increased volatility is likely to last at least until the referendum,” KBC senior economist in Brussels, Koen De Leus, said.

An opinion poll by TNS showed on Tuesday 47 percent of Britons would vote for the UK to leave the European Union, while 40 percent would vote to stay.

The European banking index was down 1.8 percent, taking total losses to more than 26 percent this year. It is the worst performing sector in Europe in 2016.

Uncertainty over the Fed meeting also weighed on markets. The U.S. central bank is widely expected to leave rates unchanged after the much weaker-than-expected May nonfarm payrolls report, analysts said.

“Markets will continue to price in a worst-case scenario, meaning further declines are likely in the days ahead except if there would be a substantial shift in public opinion or some kind of verbal intervention from politicians or central bankers to bring back calm into the markets,” City of London Markets trader Markus Huber said.

Officials with knowledge of the matter told Reuters that the ECB would publicly pledge to backstop financial markets in tandem with the Bank of England should Britain vote to leave the European Union.

Today’s European research round-up

ADVISORY - Reuters plans to replace intra-day European and UK stock market reports with a Live Markets blog on Eikon (see cpurl://apps.cp./cms/?pageId=livemarkets for site in development). In a real-time, multimedia format from 0600 London time through the 1630 closing bell, it will include the best of our market reporting, Stocks Buzz service, Eikon graphics, Reuters pictures, eye-catching research and market zeitgeist. Breaking news and dramatic market moves will continue to be alerted to all clients and we will continue to provide a short opening story and comprehensive closing reports.

If you have any thoughts, suggestions or feedback on this, please email mike.dolan@thomsonreuters.com.

Mike Dolan, Markets Editor EMEA. (Editing by Ruth Pitchford)

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