While you were sleeping: UPDATED Brexit keeps lid on stocks

Wall Street fell ahead of the UK's referendum on the country's European Union membership.

US Federal Reserve chairwoman Janet Yellen's semi-annual testimony before lawmakers, on Tuesday and again on Wednesday, underpinned expectations the central bank won't be in a rush to raise interest rates, as she signalled concern over low productivity even as she remained upbeat about the outlook for the US economy.

Futures indicate 44% odds that the Fed will tighten policy this year, down from 76% probability at the start of the month, according to Bloomberg.

"We think that the US economy is in good shape, despite some setbacks in very recent months," International Monetary Fund director Christine Lagarde says following a review of the world's largest economy.

Even so, Ms Lagarde warned the US labour force participation is dropping, as has productivity growth.

"All in all, our assessment is that, if left unchecked, these four forces – participation, productivity, polarisation, and poverty – will  corrode the underpinnings of growth (both potential and actual) and hold back gains in US living standards," Ms Lagarde says.

At the Wall Street close, the Dow Jones Industrial Average was down48.90 points, or 0.3%, to 17,780.83. The Nasdaq Composite Index fell 0.2% to 4833.32 and the Standard & Poor's 500 Index also fell 0.2% to 2085.45.

The Dow moved lower as slides in shares of McDonald's and IBM outweighed gains in shares of Merck and DuPont.

US crude oil fell 1.4% to $US49.13 a barrel after inventory data showed supplies fell less than expected last week.

Gold, which tends to gain in times of market stress, pulled back 0.2% to $US1268 an ounce.

"We are clawing back some of the losses from last week and are in a bit of a holding pattern ahead of tomorrow's vote," New York-based Wunderlich Securities chief market strategist Art Hogan told Reuters.

"I think if there is a 'leave' vote, then a July rate hike is definitely off the table and we might be looking at just one hike in December."

Europe's Stoxx 600 Index ended the session with an advance of 0.4% from the previous close, paring back some of its earlier gains amid fresh polls on Thursday's referendum indicating British voters might be leaning toward a Brexit.

Ms Yellen warned that a Brexit could have "significant economic repercussions," according to news reports.

"If the country decides to stay within the EU, growth is expected to rebound later this year and to remain steady over the next few years," the IMF said last week.

"Inflation should gradually rise to target after the effects of past oil and other commodity price falls dissipate and as low unemployment helps push up wages."

The UK's FTSE 100 index increased 0.6%, as did Germany's DAX index while France's CAC 40 index gained 0.3%.

(BusinessDesk)