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Monday, 8 September 2014

FTSE slips further from highs on Scotland opinion poll jitters

 

LONDON - Britain's top share index slipped further away from a 14-1/2 year high on Monday, with the first opinion poll lead for supporters of Scottish independence raising political uncertainty and hurting investors' sentiment.

People pass electronic information boards at the London Stock Exchange in the City of London October 11, 2013. REUTERS/Stefan Wermuth

Companies more exposed to Scotland were among the worst hit. Weir Group, Royal Bank of Scotland, Lloyds, Standard Life, SSE and Aberdeen Asset Management, down 1.3 to 2.8 percent, were among the top decliners on the benchmark FTSE 100 index.

With less than two weeks to go before the Sept. 18 vote, the poll put the "Yes" to independence campaign on 51 percent against the "no" camp on 49 percent, overturning a 22-point lead for the unionist campaign in just a month, a YouGov survey for the Sunday Times newspaper said.

The British government was scrambling to respond by promising a range of new powers for Scotland if it chooses to stay within the United Kingdom.

"With uncertainty hated by investors, the latest poll in Scotland is heaping pressure on investors. The future for British banks, Lloyds and RBS, is raising questions, whilst the key question of currency remains significantly up in the air," Keith Bowman, equity analyst at Hargreaves Lansdown, said.

"For now, with the vote less than two weeks away, the UK stock market faces a difficult time, with investors playing cautiously, booking profits where possible.”

The blue-chip FTSE 100 index was down 0.4 percent at 6,829.64 points by 0747 GMT after hitting a 14-1/2 year high last week. The index is up just 1.3 percent so far this year.

However, some analysts said that a weaker sterling following the political uncertainty would be good for the FTSE 100 index. The UK currency fell 1 percent against the dollar to hit a near 10-month low early on Monday.

"The increasing possibility of a ‘yes’ will weaken sterling further, in our view, and this could be good news for UK equities in aggregate, with a majority of revenues derived from abroad," Gerard Lane, equity strategist at Shore Capital, said.

"We favour those names with U.S. economic exposure as it appears to us that the U.S. has the quickest economic momentum."

Among individual sharp movers, Associated British Foods fell 4 percent despite maintaining its annual earnings guidance, with a good finish to the year from discount fashion chain Primark offsetting continued weakness in the group's sugar operations.

"Shareholders are so accustomed to ABF upgrading profit forecasts that today's strong trading update without a material upgrade to estimates may mean some profit taking after a near doubling of the share price over the past year." Neil Shah, analyst at Edison Investment, said.

Reference: Atul Prakash

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