Brexit backers seen gaining ground,

Mounting fears of a British vote to leave the European Union rocked global markets Monday as some polls showed backers of a “Brexit” pulling further ahead.

Stocks fell 3.5% in Japan, 2.5% in Hong Kong, 2% in Europe and 1.2% in the United Kingdom. In the U. S., the Dow Jones industrial average closed down 133 points, or 0.7%, at 17,732.

More volatility is likely as the June 23 referendum nears, says Kathy Bostjancic, head of macro investor services for Oxford Economics. “There’s a heightened sense of uncertainty,” she says.

Forty- five percent of respondents in a Financial Times poll out Monday supported the U. K.’ s withdrawal from the EU, while 43% favored staying. In an ICM survey, Brexit proponents led 49% to 44%. Other polls show “stay” votes leading but “leave” supporters gaining ground. Many analysts believe most Brits would vote to remain in the union.

Investors’ biggest fear is that a vote to secede would encourage struggling EU countries such as Poland and Hungary to follow, says economist Paul Ashworth of Capital Economics. Jitters over such an outcome could sap busi- ness confidence and spark financial market turbulence globally and in the U. S., Bostjancic says. Yet, she says, such concerns also could prompt the Federal Reserve to delay its next interest rate hike until late this year, offsetting part of any market sell- off.

Ashworth says the turmoil is likely to be short- lived, especially if concerns about other EU nations withdrawing are allayed.

A British vote to leave the EU would disrupt trade and investment relationships between the U. K. and other EU countries during a two- year period in which agreements are renegotiated, the International Monetary Fund has said. The British pound is likely to fall 15% vs. the dollar while the euro declines 4%, Oxford says. That’s likely to hurt U. S. exports to the U. K., though they represent just 5.7% of total U. S. exports and 0.7% of U. S. GDP, the research firm says.

Some economists fear a falling pound will drive up prices for U. K. imports, prompting the Bank of England to raise interest rates to curtail inflation and triggering a housing crash, Ashworth says. He disagrees, saying the pound would rally. The IMF says a vote to leave would set off a British recession. But Bostjancic expects it to simply trim U. K. economic growth by about 0.7 percentage points in 2017 and 2018.

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CHRIS J RATCLIFFE, AFP/ GETTY IMAGES Voters backing a British exit from the European Union have pulled ahead of “stay” votes, according to some polls.