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Investors heave sigh of relief

Companies with Scottish connections outperform general market; sterling up

TV screens show Scotland’s referendum results as money traders work at a foreign exchange dealing company in Tokyo on Friday.The British pound jumped while Japanese shares surged. — AP

London: World markets rallied on Friday as Scotland’s decision to stay in the United Kingdom lifted Europe and got investors over the latest in a recent run of tricky global political hurdles.

Scotland voted to remain in the UK by 55 per cent to 45 per cent, a clear outcome likely to bring relief to a number of countries in Europe, particularly Spain, which is facing similar secessionist pressures in Catalonia.

Sterling initially surged to a two-week high against the dollar and a two-year peak against the euro before losing some steam, while London’s FTSE share index and Spanish stocks and bonds jumped.

Global shares were already heading towards their fifth weekly gain in the last six. They have been boosted by further assurances this week that interest rates are likely to remain at record lows in many major economies for some time.

News that Chinese internet giant Alibaba priced its IPO at $68 a share on Thursday also supported the market.

“I am happy today, risk is back on, everybody is happy today,” said Geir Lode, head of global equities for fund manager Hermes in London. “We have Scotland, Alibaba is huge — what could be better?”

The pound’s bounce against the dollar was not as large as some had predicted though and it had retreated to $1.6386 as US trading began. But it remained strong against some of the other major currencies, hitting a two-year high of 78.10 pence per euro and a six-year high of ¥180.70.

Those companies with Scottish connections outperformed the general market. Among them, Royal Bank of Scotland was up three per cent, while Lloyds Banking Group rose one per cent. Oil giant BP, which has sizeable operations off the shores of Scotland, was up 1.1 per cent, too.

Royal Bank of Scotland, which is majority-owned by the UK government since receiving a bailout during the financial crisis in 2008, said it was abandoning a contingency plan that included moving its head office down south to England.

“That contingency plan is no longer required,” the bank said in a statement. “Following the result it is business as usual for all our customers across the UK and RBS.”

The cheer from the still-United Kingdom spread to the rest of Europe’s bourses, and Wall Street was also expected to start on the front foot after another week of record highs.

The eurozone’s blue-chip Euro STOXX 50 index rose 0.7 per cent before traders took profits in London and Frankfurt and nerves started to show in France ahead of a sovereign rating review by Moody’s. Spain’s IBEX outperformed with a 0.7 per cent rise, helped by a fall in Spanish 10-year government bond yields as markets viewed Scotland’s “No” vote as having reduced prospects of a stronger push for a breakaway in Catalonia. “For the markets in general, the Scottish result is probably the best outcome because the ‘Yes’ vote winning was really not priced in and that could have caused chaos, with contagion to Europe,” said Clairinvest fund manager Ion-Marc Valahu.

Asia shares outside Japan had added 0.2 per cent, supported by Wall Street’s strong showing overnight after Alibaba’s IPO bonanza, though the region was still on track for a weekly loss of about 1.4 per cent.

The S&P BSE Sensex fell less than 0.1 per cent to 27,090.42 points at the close on Friday. For the week, it added 0.1 per cent.

Japan’s Nikkei ended up 1.6 per cent at a seven-year closing high, giving it a 2.3 per cent gain for the week.