The British pound fell sharply along with the FTSE 100 after a poll gave the Yes campaign a two point lead among likely voters in Scotland’s referendum on independence, scheduled for next Thursday.
By Kevin Loane
Monday, September 8, 2014
Some degree of risk aversion was felt in US markets too. Both the S&P 500 and the Dow Jones Industrials Average opened in the red, down 0.11% to 2005.52 and 0.09% to 17,121.12, respectively, during early morning trading. US July consumer credit data, due for release later today, could give an indication as to whether rising household confidence has translated into increased borrowing and spending. Later in the week, President Barack Obama will make a national speech outlining his regime’s strategy toward the militant group now known as the Islamic State (IS). By 07:00 EST, Brent North Sea crude was down 0.7% to $100.10 per barrel, perhaps indicating investor confidence ahead of his remarks. In a slow week for domestic economic data, market participants may instead focus on international events. Over the weekend, YouGov announced results of a poll on Scotland’s referendum that showed the Yes campaign was ahead for the first time, with 51% of respondents answering in the affirmative to the question ‘Should Scotland be an independent country?’. The dramatic news came after several weeks of increasing gains for the pro-independence campaign. Indeed, the catch-up has been dramatic. On August 7, the No campaign held a 22 point lead. According to YouGov, voters increasingly believe that an independent Scotland would not suffer economically from independence, and have been put off by perceived negative tactics on the part of the No campaign. With ten days to go, the race has been described as ‘too close to call’. Traders fled the pound on the uncertain outlook, with UK Chancellor, George Osborne, reiterating that there would be no currency union in the event of a Yes vote. Scottish leader, Alex Salmond, has long maintained that an independent Scotland would be able to keep the pound. GBP/USD opened the week’s trading firmly in the red, down 1.3% against the dollar as cable fell to a thirteen-month low of 1.6119. The news led to a general ‘risk off’ mind-set, and the benchmark FTSE 100 also declined, by 1.1%, to 6778.87 at 12:00 BST. Many analysts have pointed to possible negative blows to confidence and economic activity in the event of a Yes vote. Meanwhile in Asia, there were contrasting fortunes for its two largest economies. Revised data showed that Japan’s economy shrunk by more than previously thought during the tax hike-impacted second quarter. New information showed that output fell by 7.1% at an annualized rate, which was slightly worse than the original -6.8% estimate. Meanwhile, trade data from China pointed to a more positive external balance than was expected. Exports rose by 9.4% in the twelve months to August, outpacing a 2.4% decline in imports, leading to a rise in its overall trade balance to $49.83 billion (Consensus: $40.00 billion).
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