European shares clawed bank some of their losses after a five-day losing streak caused by jitters about next week’s referendum on the UK’s membership of the European Union.

Illustrating the volatility gripping stock markets, the FTSE 100 gained 43 points, or 0.7%, to reach 5,966 after reaching a high for the month of 6,300 last week. The pan-European Stoxx 600 index rose 0.9%, recovering some of the €600bn (£477bn) it had lost over the previous five days.

British housebuilders such as Taylor Wimpey and Berkeley held back a stronger rally after Berkeley said there was a 20% drop in reservations of new homes at the start of the year, due partly to concerns over Britain’s EU vote.

Sterling gained ground for the first time in more than a week, rising by up to half a per cent against the dollar after George Osborne promised a flurry of tax rises and spending cuts to shore up the government’s finances in the event of a Brexit vote.

Traders said expectations of a dovish statement from the US Federal Reserve were also calming the market, after the UK’s better-than-expected wages and employment data prodded sterling to a day’s high of $1.4196.

The Fed’s interest rate-setting committee indicated that a rise was still some way off after the pace of job growth slowed in recent months, even as the overall economy picked up speed.

The Fed, which could opt to raise rates next month, said in a possible reference to the Brexit vote that it needed a clearer picture of economic developments before increasing rates again.