Sterling, British Shares under Pressure from Scottish Vote

Sterling declined on Monday and British shares look set to underperform their peers in Europe after a poll found rising support for Scottish independence.

European shares are expected to enjoy a firm tone on the whole, following gains on Wall Street, with German shares <.GDAX >seen rising up to 0.4 percent and French shares .FCHI as much as 0.2 percent.

Britain’s shares are seen less fortunate, however, with spreadbetters seeing a flat to weaker opening after a poll showed the “yes” to Scottish independence campaign on 51 percent against 49 percent for the “no” camp ahead of the Sept 18 referendum.

Sterling GBP=D4 also shed 0.8 percent to $1.6208 after sliding as low as $1.6165 in early trade, the lowest since last November and the biggest daily drop in eight months.

Apart from that, share prices are generally supported after traders interpreted downbeat U.S. jobs report as suggesting the Federal Reserve will hold off on hiking interest rates anytime soon.

The S&P 500 hit a fresh closing high on Friday after data on Friday showed U.S. nonfarm payrolls grew by only 142,000 last month, far below the 225,000 forecast by analysts in a Reuters poll.

The Nikkei stock average .N225 climbed about 0.2 percent, shrugging off data that showed Japanese economy fell into a deeper hole in the second quarter.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down 0.1 percent, not helped by Chinese trade data, which showed unexpected fall in imports, raising concerns about tepid domestic demand in the world’s second largest economy.

Indonesia’s Jakarta Composite Index .JKSE, meanwhile, hit a record high in early trading, besting the previous record set in May 2013.

In contrast to sterling’s sharp moves, other major currencies were treading water. The dollar was steady on the day at 105.13 yen JPY=, remaining shy of its near six-year high of 105.71 touched on Friday.

The euro also steadied at $1.2936 EUR=, holding just above a 14-month low of $1.2920 hit last week in the wake of the European Central Bank’s easing steps on Thursday.

Net short positions in the euro ballooned in the week ended Sept. 2, rising to their largest in more than two years, according to Commodity Futures Trading Commission data released on Friday.

“The less extreme positioning in sterling and the looming Scottish referendum may mean that sterling lags behind the euro during the days ahead,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York, said in a note to clients.

On the commodities front, spot gold XAU= was flat at $1,268.61 an ounce, well above a three-month low of $1,256.90 hit on Friday before the U.S. jobs data.

Brent crude LCOc1 edged up 0.1 percent to $100.96 a barrel, after having posted its third weekly drop in four weeks.

Source: Reuters