This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.theguardian.com/business/2014/sep/19/pound-stock-market-scotland-votes-no

The article has changed 6 times. There is an RSS feed of changes available.

Version 0 Version 1
Pound rallies with stock market surge predicted after Scotland votes no Pound rallies and stock market rises after Scotland votes no
(about 1 hour later)
Big gains were predicted for the stock market with sterling soaring on the foreign exchange markets in a rally sparked by the news that Scotland has rejected a break away from the rest of the UK. Relief spread across City dealing rooms on Friday as shares rose and sterling rallied after Scotland rejected a break away from the rest of the UK.
In overnight trading in Asian markets, sterling touched a new two-year high against the euro and a further rally is now expected when dealing opens in London. Royal Bank of Scotland led the FTSE 100 higher, although the 44-point rise in the index of the largest companies listed in London was more muted than expected.
The FTSE 100 was expected to open 80 points higher at around 6,900 – close to its all time peak of 6,950.6 reached in 1999. Sterling had touched a new two-year high against the euro in Asian trading hours and was up half a cent against the dollar at $1.64.
The stock market rally was led by RBS, up 3.5%, and other companies which had exposure to Scotland, including rival bailed-out bank Lloyds Banking Group, which was 1.8% higher in early trading. Both of them had warned they would move their registered offices from Edinburgh in the event of a yes vote, while insurer Standard Life had said it would set up English subsidiaries.
RBS made clear that its contingency plan was no longer required, saying it was "business as usual" although Lloyds and Standard Life were less unequivocal in their remarks. Lloyds said it remained "fully focused on supporting households and businesses in Scotland as well as right across the UK", while Standard Life said it would "consider the implications" of the referendum which is expected to lead to changes right across the UK. Lloyds is expected to return to the question of where to base its registered office when implementing the restructuring required by the rules requiring a "ringfence" to be erected between high street and investment banking activities by 2019.
A relief rally had been expected after Scotland voted against independence although analysts cautioned that political uncertainty remained after David Cameron, the prime minister, promised more devolution for the UK.
"The UK economy, most businesses and the markets will likely all heave a huge sigh of relief that the Scots have rejected independence – and by a slightly larger margin than the recent polls had suggested," said Howard Archer, chief European and UK economist at IHS Economics. "There would likely have been serious adverse near-term repercussions for the economy both south of the border and particularly in Scotland from a yes vote.""The UK economy, most businesses and the markets will likely all heave a huge sigh of relief that the Scots have rejected independence – and by a slightly larger margin than the recent polls had suggested," said Howard Archer, chief European and UK economist at IHS Economics. "There would likely have been serious adverse near-term repercussions for the economy both south of the border and particularly in Scotland from a yes vote."
The governor of the Bank of England, Mark Carney, had flown back from the G20 meeting in Cairns, Australia, in time for the referendum result and was in Threadneedle Street in the early hours of the morning in case a contingency plan was needed if there had been a yes vote. The governor of the Bank of England, Mark Carney, had flown back from the G20 meeting in Cairns, Australia, in time for the referendum result and was in Threadneedle Street in the early hours of the morning in case a contingency plan was needed if there had been a yes vote. In the event, the Bank of England did not make formal statements once the outcome of the referendum was known.
Archer said the no vote would also lead to expectations that the Bank of England would interest rates "early next year". A yes vote would have delayed expectations for a rise in rates off the low of 0.5% – the level set since March 2009.Archer said the no vote would also lead to expectations that the Bank of England would interest rates "early next year". A yes vote would have delayed expectations for a rise in rates off the low of 0.5% – the level set since March 2009.
"Looking at the near-term implications for the UK economy as a whole, while a yes vote for independence would have been unlikely to completely derail the UK recovery given that it now looks well established, it could very well have put a serious dent into near-term growth prospects at least," he said. Bill O'Neill at UBS Wealth Management agreed. "The largest impact will be political. The impact on the UK economy will be minimal and it will maintain its current growth trajectory. The Bank of England will be more likely to raise interest rates as the recovery continues," said O'Neill.
While the economic risks may have receded – gilt yields could have risen increasing the government's cost of borrowing – there will be political uncertainty as the prime minister attempts to see through his promise of more devolution for Scotland. Many currency dealers had been at their desks overnight while the votes came in. David Bloom, head of foreign exchange strategy at HSBC, was one of them and said a key moment had been just before 11pm when pollster Peter Kellner, who runs YouGov, said it was 99% certain that it was a victory for no. "Sterling had nerves of steel through the night," he said.
Five major banks – including bailed-out Royal Bank of Scotland and Lloyds Banking Group – had warned they would move their registered offices from Edinburgh to London in the event of a yes vote and Brenda Kelly, chief market strategist at IG, said she expects shares in firms with a link to Scotland to lead the stock market rally. Bloom, along with his colleagues at HSBC, said: "Possible pressure to devolve powers to other regions in the UK means that, despite the result, the UK may never be the same again."
"A relief rally is in the making in UK markets, and key areas to watch will be the banks such as RBS and Lloyds, as well as big Scottish firms like Standard Life, Aberdeen Asset Management and Weir Group. Investors in these firms will be relieved that management will be able to devote their time to business performance, rather than fretting about contract changes or headquarters moves," Kelly said. While sterling rallied, the HSBC analysts warned "the shine had already begun to come off".
In the event of a yes vote there might also have been a knock to consumer confidence in the remaining parts of the UK. "Any disappointment on growth, or renewed focus on the large current account deficit, could still weigh on the currency," the HSBC analysts said.
Business leaders called for politicians to rally behind the UK. John Cridland, director general of the employers' body, the CBI, said: "As the debate now moves to the question of further devolution, it is important that it does not undermine the strength of the single internal market and it is in the best interests of citizens living in England, Wales and Northern Ireland, as well as those in Scotland."