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Thursday, 11 September 2014

Shares sag but sterling gains as Scotland poll eases nerves

 

         A man walks through the lobby of the London Stock Exchange August 5, 2011.REUTERS/Suzanne Plunkett

Sterling rose off multi-month lows on Thursday as a poll showing that most Scots intend to vote against independence next week alleviated concerns over the future of the UK, but equities slipped on an unexpected rise in U.S. jobless claims.

UK financial stocks with strong business ties to Scotland such as insurer Standard Life (SL.L) and Royal Bank of Scotland (RBS.L) outperformed. But broader European stock markets were pegged back due to the continuing uncertainty over the issue.

Equities were also hurt after the number of Americans filing new claims for unemployment benefits unexpectedly rose last week, which weighed on U.S. equity futures DJc1 SPc1.

The pan-European FTSEurofirst 300 index .FTEU3 edged down by 0.2 percent, while the MSCI World Index .MIWO00000PUS, which tracks stocks from developed economies, was flat.

The poll on behalf of the Daily Record newspaper showed 47 percent intend to vote in favor of independence while 53 percent will vote against. Other recent surveys had put the rival campaigns neck-and-neck.

"There's a bit of uncertainty priced in around Scotland, but nowhere near as much as it should be," said Edmund Shing, global equity fund manager at BCS Asset Management.

Sterling was up by 0.2 percent at $1.6242 GBP=D4, having recovered on Wednesday from $1.6051, its lowest since mid-November last year, after the latest Survation poll was released. The euro eased 0.2 percent to 79.560 pence EURGBP=D4, below a three-month high of 80.66 pence struck on Wednesday.

The latest Scottish survey also pushed down Spanish bond yields as it was seen as lessening the risk that a breakaway Scotland could embolden a similar bid by Spain's wealthy Catalonia region.

Still, the cost of hedging against more sterling weakness for the next week, which covers the Scottish referendum, jumped to a 13-month high of 11.725 percent. GBPSWO=R

DOLLAR RISES AGAINST YEN

The dollar powered to a fresh six-year high against the yen on Thursday.

Against a basket of major currencies .DXY it traded at 84.3268, near a 14-month high of 84.519 reached on Tuesday. Barring a turnaround on Friday, it was on course for a ninth consecutive week of gains as expectations grow that the U.S. Federal Reserve will raise interest rates in 2015.

Brian Hennessey, portfolio manager of the Alpine Dynamic Dividend Fund, said that while the Scotland vote was creating some near-term uncertainty, the broader global economic backdrop remained reassuring for markets.

"The macroeconomic backdrop is favorable, with the labor market improving steadily in places like the U.S, Germany and the UK," said Hennessey.

U.S. stocks ended higher overnight, which helped underpin Asian stock markets. Japan's Nikkei stock average .N225 added 0.8 percent to close at an eight-month high.

Chinese consumer prices rose less than expected in August, climbing 2.0 percent from a year earlier, down from 2.3 percent in July and below market expectations of 2.2 percent.

However, the China data also provided more evidence of economic slowdown and some economists said Beijing might announce fresh stimulus measures.

The Chinese inflation data pushed London copper prices to their lowest level in almost three months, while gold also traded near a three-month low.

Brent crude fell to a 17-month low below $98 a barrel on Thursday, down for the sixth straight session as worries over ample supply and weak demand outweighed concerns that conflict in the Middle East could curb oil production.

Reference: Sudip Kar-Gupta

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