Financial markets relieved by Scotland 'No' vote, but still wary of the future

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Financial markets relieved by Scotland 'No' vote, but still wary of the future

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Scotland’s rejection of independence ended a fraught few weeks for the financial markets with investors spooked by the thought that Britain might split apart triggering financial turmoil.

In London, shares of banks and companies with significant exposure to the North Sea oil industry got a boost amid relief from the investment and business community.

Analyst Chris Beauchamp with IG said: “I think the most important thing is the removal of uncertainty. You’re not going to have 18 months of negotiations over the pound, over the currency, over the debt-sharing and I think the economic fundamentals argument now reasserts itself. You could make a case for saying that a rate hike is now more likely in 2015 with the Bank of England not having to worry about independence.”

When a split looked more likely, the value of the pound had fallen sharply against the dollar.

But the ‘No’ vote brought only a short lived bounce back for sterling as there are still major political risks, from the fallout of this vote to next May’s general election in the UK.

There was a bit of a relief rally for the Spanish stock market as the referendum outcome was seen as reducing the prospects of a stronger push for Catalonia breaking away.

This vote not only keeps Britain intact but also reduces the likelihood of it leaving the European Union, potentially a much greater risk for markets and something Scottish independence might well have precipitated.