LONDON: Europe’s main stock markets and the pound jumped on Friday as investors welcomed news that Scotland has voted to reject independence from the United Kingdom.
In early morning deals, London’s benchmark FTSE 100 index added 0.67 percent to 6,865.12 points, while sterling hit a two-year euro high in anticipation of victory for the “No” campaign.
In Paris, the CAC 40 index rose 0.57 percent to stand at 4,490.60 points and Frankfurt’s DAX 30 advanced 0.52 percent to 9,848.76 compared with Thursday’s closing level.
“European equities have surged out of the starting blocks as news that the Scottish Independence attempt has failed,” said Capital Spreads dealer Jonathan Sudaria.
Scotland rejected independence in a referendum that left the centuries-old United Kingdom intact but paved the way for a major transfer of powers away from London.
Despite a surge in nationalist support in the final fortnight of the campaign, the “No” camp secured 55.30 percent of the vote against 44.70 percent for the pro-independence “Yes” camp in Thursday’s referendum.
The British pound continued its fightback on Friday, with euro tumbling to 78.10 pence on initial returns pointing to a victory for the “No” camp. That was the lowest level since July 2012 and compared with 78.82 pence late in New York on Thursday.
At the same time, sterling jumped to a two-and-a-half-week peak at $1.6525, and also hit a six-year high of 180.71 yen.
The British pound had come under severe pressure in recent weeks as opinion polls had showed rising support for the “Yes” campaign.
In the event of independence, First Minister Alex Salmond and his Scottish National Party (SNP) had wanted Scotland to continue using the pound and enter into a formal, euro-style monetary union with what would remain of the United Kingdom.
But the British government had rejected such an arrangement.
On the London stock market, Britain’s Royal Bank of Scotland and Lloyds Banking Group saw their shares jump after both lenders scrapped contingency plans to switch operations to England in the event of Scottish independence.
RBS shares rallied 3.53 percent to 369.9 pence, topping the FTSE 100 leaderboard, and Lloyds gained 1.88 percent to 77.3 pence.
“The announcement we made about moving our registered head office to England was part of a contingency plan to ensure certainty and stability for our customers, staff and shareholders should there be a ‘Yes’ vote,” said an RBS spokesman.
“That contingency plan is no longer required. Following the result it is business as usual for all our customers across the UK and RBS.”
Other companies with major Scottish operations also leapt higher in London. Domestic gas and electricity provider Scottish and Southern Energy gained 1.86 percent to 1,549.36 pence.
Engineering company Weir Group won 1.52 percent to 2,670 pence and investment firm Aberdeen Asset Management added 0.96 percent to 439.70 pence.
“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,” said Chris Beauchamp, analyst at IG trading 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.
“Meanwhile, the capital flight from the pound and gilts should see a reversal too.”
British bonds climb
The yield on British 10-year debt rose as many investors had bought bonds as a safe-haven asset.
The rate of return rose to 2.603 percent at 0700 GMT, from 2.575 percent at Thursday’s close.
Prior to the referendum result, investors were anxious over the economic uncertainty which would have followed a “Yes” result, dealers said, and had been buying bonds as a safe-haven asset.
“While the outcome of the Scottish referendum hasn’t necessarily come as a huge surprise . . . it certainly removes uncertainty which has put off of some investors from pouring money into stocks in recent weeks,” added trader Markus Huber at broker Peregrine & Black.
“Furthermore, the clear victory of the ‘No’ campaign might also prevent other independence movements throughout Europe off from pursuing a referendum in the near future.”