8th Sep 2014 09:28
LONDON (Alliance News) - UK equities are pushing lower Monday, with those stocks most exposed to the fallout of a potential vote in favour of an independent Scotland leading the falls, following a weekend poll that put the "Yes" vote ahead of "No" for the first time.
The pound also is considerably weaker, given the uncertainty that surrounds how the currency may be used in Scotland in the event of a vote for independence.
By mid-morning Monday, the FTSE 100 is down 0.6% at 6,813.80, the FTSE 250 is down 1.1% at 15,749.19, and the AIM All-Share is down 0.3% at 777.25.
The pound reached a ten-month low against the dollar in early trade of USD1.6123, as well as a near-three-week low against the euro of EUR1.2455.
"The pound is in freefall as the "Yes" campaign in Scotland continues to gather momentum. The vote looks too close to call, and there is a huge amount of uncertainty about what will happen economically if the Union is broken up," said UFX Managing Director Dennis de Jong.
A weekend poll of Scottish voters, carried out in early September, found that 51% of those that had made up their mind plan to vote "Yes" on September 18 for an independent Scotland, compared to 49% that plan to vote "No". The poll was the first of its kind to give the separatists a lead.
Most of the biggest FTSE 100 fallers Monday have significant exposure to Scotland and therefore face significant uncertainty if Scotland votes for independence. For example, companies currently headquartered in Scotland may decide to move south of the new national border.
Royal Bank of Scotland is trading down 2.5%, while Bank of Scotland owner Lloyds Banking Group is down 2.7%. Glasgow-based engineer Weir Group is down 1.9%, Aberdeen Asset Management is down 1.6%, and Scottish energy supplier SSE is down 2.1%.
"The risk of a "Yes" vote is now material. We expect weakness in the exposed Utility companies through to the referendum on 18th September," says Liberum Capital analyst Peter Atherton.
Major European stocks markets, relatively unaffected by the Scottish vote, are performing a little better Monday, following a higher close made by US markets on Friday. The German DAX is fractionally higher, while the French CAC 40 is down about 0.2%.
The better performance comes despite the Sentix eurozone investor confidence index plunging to a one-year low in September, recording a reading of negative 9.8, down from 2.7 in August and missing expectations for just a small drop to 2.0.
The only domestic economic data released Monday has been the Halifax house price survey, which showed that UK house prices grew 9.7% during three months to August, fractionally slower than the 9.9% growth that had been expected, and down from the 10.2% growth in the three months to July.
Outside of those stocks exposed to the Scottish independence vote, Associated British Foods is the heaviest FTSE 100 faller, down 4.1% after releasing a full-year trading statement. Despite announcing a strong performance at budget clothing retailer Primark and reiterating full year guidance for the group, there are concerns about ongoing price pressure in the sugar market. The current global sugar price is about 17 cents per pound, which AB Foods says is below the average cost of production and unsustainable, but analysts see little to move prices higher in the near-term.
"Shareholders are so accustomed to ABF upgrading profit forecasts that today's strong trading update without a material upgrade to estimates may mean some profit taking after a near doubling of the share price over the past year," says Edison Investment Research analyst Neil Shah.
At the other end of the leading index, the airlines are performing well following weekend reports that Virgin Atlantic is set to close its UK domestic airline Little Red. Virgin founder Richard Branson's stated aim of the airline was to "stop BA dominating routes and driving higher prices", reported the Sunday Times. The potential loss of a competitor has boosted easyJet and British Airways owner International Consolidated Airlines, which are up by 0.7% and 0.4%, respectively.
Bank note printer De La Rue is up 3.2%, leading the FTSE 250 gainers, following the announcement from the Bank of England that it it the preferred bidder in the tender for its note printing contract. A contract is expected to be signed in October.
Dechra Pharmaceuticals is up 1.6% after raising its total dividend by 10% to 15.4p from 14p. The veterinary pharmaceutical business posted a pretax profit of GBP21.4 million, up from GBP12.5 million, as it saw revenue rise to GBP193.6 million from GBP189.2 million.
There is no significant data form the US scheduled for released Monday. Following the record highs made by Wall Street On Friday, in the wake of a soft monthly jobs report, equities there are set to open a touch softer. The DJIA, S&P 500, and Nasdaq Composite futures are all pointing about 0.1% lower.
By Jon Darby; [email protected]; @jondarby100
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