Scottish referendum fears slam pound; stocks fall
BY HERBERT LASH
(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.
On Wall Street, the Dow Jones industrial average .DJI closed down 25.94 points, or 0.15 percent, at 17,111.42 and the S&P 500 .SPX fell 6.17 points, or 0.31 percent, to 2,001.54. The Nasdaq Composite .IXIC added 9.39 points, or 0.2 percent, to 4,592.29.
The pound sterling sank more than 1.0 percent, the most in 13 months, to trade at $1.6115 against the U.S. dollar.
The dollar was stronger against the euro, up 0.4 percent at $1.2896, and gained against a basket of six major currencies .DXY, up 0.65 percent on the day.
Gold prices fell to a three-month low as the dollar recovered losses following a disappointing U.S. jobs report on Friday. The December contract settled down $13 at $1,254.3 an ounce.
U.S. Treasury debt prices retreated, with the benchmark 10-year U.S. Treasury note down 3/32 in price to yield 2.4730 percent.
Brent crude oil slid below $100 a barrel for the first time in more than a year as Chinese and U.S. data pointed to slower-than-expected growth in the world’s top oil consumers.
Brent LCOc1 fell to a low of $99.36 a barrel, its lowest since May 2013. It settled down 62 cents at $100.20. U.S. crude CLc1 fell 63 cents to settle at $92.66 a barrel.
(Reporting by Herbert Lash; Additional reporting by Marc Jones in London; Editing by Dan Grebler)