European shares propped up by firmer bank stocks

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* STOXX 600 touches highest level in more than two weeks

* Julius Baer rises after Citigroup upgrade

* Spanish property firm Merlin surges on Metrovacesa deal

By Sudip Kar-Gupta

LONDON, June 22 (Reuters) - European shares gained ground on Wednesday, with two key regional indexes touching their highest level in more than two weeks, as firmer financial stocks propped up markets.

The pan-European STOXX 600 index and the similar FTSEurofirst 300 index both edged up 0.1 percent, having at one stage touched their highest levels in more than two weeks.

Both were also set for their fourth straight day of gains.

The euro zone’s blue-chip Euro STOXX 50 index was up 0.3 percent at 2,974.91 points.

Shares in Swiss financial group Julius Baer advanced 2 percent after Citigroup raised its rating on the stock to “buy” from “neutral”.

Spanish real estate company Merlin also surged 5.1 percent after agreeing a merger with Metrovacesa to form Spain’s largest property group.

Britain’s FTSE 100 rose 0.1 percent, a day before the country votes on its membership of the European Union.

Betting odds show a greater probability that Britain will vote to stay in the EU rather than leave, which has helped markets recover this week, although opinion polls show the two camps are roughly neck-and-neck.

Some fund managers remained cautious on the markets ahead of the vote, with strategists at Credit Suisse saying they would cut their FTSE 100 end-2016 target by 6 percent to 6,200 points if Britain voted to quit the EU.

“I think the result of the Brexit vote is 50/50, and it will probably be very tight,” added Olivier de Berranger, a fund manager at French firm La Financiere de L’Echiquier, which manages around $9 billion in assets.

Berranger said he had cut his portfolio’s equity allocation to 25 percent from 32 percent at the start of June due to the uncertainty over the referendum.

He said he had taken protection against any market downturn by buying a July “put” option on the Euro STOXX 50 index with a strike price at 2,950 points. That “put” option gives the right to sell the index at that level in July.

Others, such as Arcanum Asset Management head Paul Gleeson, were confident Britain would vote to stay in.

Gleeson sold “put” options betting on a fall on the FTSE and bought “call” options allowing him to buy the FTSE at 6,900 points in July.

“I am expecting a ‘Remain’ vote and a big rally,” he said.