Scottish referendum fears slam pound; stocks fall

Mon Sep 8, 2014 4:27pm EDT
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By Herbert Lash

NEW YORK (Reuters) - Scotland's threat to secede from the United Kingdom knocked the British pound to a 10-month low against the U.S. dollar on Monday and sparked weakness in major stock markets already uncertain as to whether a cease-fire in Ukraine would hold.

For the first time this year, an opinion poll showed that Scots may vote for independence next week in a referendum that could herald the break-up of Great Britain.

The pound slumped and Britain's top shares dropped further from a recent 14-1/2-year high as companies with strong business ties to Scotland fell across the board.

One of Scotland's leaders advocating independence said Scotland would share the pound with Britain, but the U.K. government has ruled this out, leading to uncertainty about valuations, debt and the sharing of North Sea oil revenues.

"If Scotland decides to go down the road of a new currency, what effect does that have on (these companies') Scottish assets and the valuations of their Scottish assets? We don't know," said Michael Hewson, chief market analyst at CMC Markets.

With little economic or political news to guide trading, stocks on Wall Street also fell, but analysts said the market trend is for higher prices with the Federal Reserve not seen raising interest rates until well into 2015.

"The path of least resistance continues to be higher. That will most likely continue for the foreseeable future, especially as everybody understands while rates will go up at some point, the move from the Fed will be very gradual," said Ryan Larson, head of U.S. equity trading at RBC Global Asset Management in Chicago.

MSCI's all-country world index .MIWD00000PUS fell 0.52 percent to 430.12, while the FTSEurofirst 300 .FTEU3 index of top European shares closed down 0.4 percent at 1,390.42.   Continued...

The London Stock Exchange is seen during ther morning rush hour in the City of London April 11, 2011.   REUTERS/Toby Melville