UK markets bounce after Scotland rejects independence
By Jamie McGeever
LONDON, Sept 19 (Reuters) - Investors in British financial assets breathed a sigh of relief on Friday, spared a prolonged and unprecedented degree of uncertainty from the United Kingdom splitting apart after Scotland voted against independence.
Stocks were called to open up by more than 1 percent, sterling rose to a two-year high against the euro, and currency market volatility - which had reached historically high levels ahead of Thursday's vote - quickly subsided.
Scotland's vote against independence ended a fraught two weeks for markets that had seen the value of sterling fall sharply after some polls suggested the 307-year old union was on the brink of collapse.
The bounce for sterling was much less pronounced than some analysts had forecast, with the currency falling back after its initial gains to be up just 0.3 percent against the dollar.
But the vote not only keeps Britain intact but also reduces the likelihood of it leaving the European Union, potentially a much greater risk for markets and something Scottish independence might well have precipitated, analysts said.
"The 'no' vote removes the huge political and economic uncertainty of untangling the 307-year-old union. A large downside risk to UK growth has lifted," HSBC strategists said in a note on Friday.
London blue chip stock futures and spreadbetter calls pointed to a 1.2 percent rise when markets open later on Friday.
The cost of insuring against big swings in sterling over the next week more than halved to 5.675 percent from a close on Thursday of 11.8 percent. Volatility had risen to levels not seen since the collapse of Lehman Brothers in 2008 and the unusually uncertain UK general election of 2010.
Sterling itself, already pushed up on Thursday by speculation on markets that Alex Salmond's nationalists had fallen short of the majority needed for independence, rose to a two-year high against the euro, with the single currency trading as low as 78.10 pence.
It came back off its peak against the dollar above $1.65, but was still up a third of one percent on the day at $1.6460 .
"Markets can move on from this event now, but the fate of the pound is still subject to great debate," said Chris Weston, chief market strategist at IG in London.
(Reporting by Patrick Graham, Sudip Kar-Gupta, Lionel Laurent, writing by Jamie McGeever; editing by John Stonestreet)
