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Scottish Independence Referendum: The Complete Summary
For those just catching up on the main news event of the weekend, namely the sudden surge in Scotland "Yes" vote polling surpassing 50% for the first time, here is a complete round up of the background, updates and expert reactions from RanSquawk, Bloomberg and AFP.
ANALYSIS: THE CASE OF SCOTTISH INDEPENDENCE
- Recent polling shows the ‘Yes’ campaign overtaking the unionists for the first time, just 10 days ahead of the final vote on September 18th
- Independent Scotland runs the risk of limited currency options and fiscal uncertainty
- UK debt ratings hang in the balance as worst-case scenario sees Westminster shouldering an estimated extra GBP 140bln in former Scottish debt
BACKGROUND
The “No” party – the unionists - are led by Alistair Darling, former Chancellor of the Exchequer, previously held a lead over the nationalists but this has reversed in the most recent polling, with the ‘No’ vote holding 49%.
The “Yes” party – the nationalists - are led by Alex Salmond, Scotland’s First Minister, and harbour hopes of swinging the referendum in their favour as latest polls suggest they have been overtaken the ‘No’ camp by 2ppts.
Serious doubts remain over the future of Scotland’s currency if the nationalists win. Salmond has repeatedly stated his intention of keeping the GBP, but all 3 main UK parties have made clear they would not be willing to share their currency and central bank with a foreign state. Also, a potential use of the GBP without a currency union would not be compatible with EU membership, as the EC requires member states to have a monetary authority of their own.
HOW WILL THE MARKET REACT?
“No” Victory – Given the somewhat complacent attitude market participants have had towards the vote indicates that the upside in riskier assets is limited in case the unionists win the referendum with a large majority. Nevertheless, expect to see some tightening in spreads of the shorter-dated implied volatilities which have widened heading into the risk event.
However, a close vote could lead to a second referendum in 5-10 years and as such, changes to UK regional governance would take place as a result of more devolution, with additional powers going to Scotland such as more autonomy over taxation. In turn, business leaders, including the head of Standard Life and RBS, will have to decide as to whether to relocate their headquarters to the UK or stay in Scotland depending on what type of policies Scotland decides to pursue with its additional powers.
“Yes” Victory – Great uncertainty revolves around an independent Scotland, specifically due to the lack of clarity over the potential new fiscal arrangements such as interest rates, taxation, investor protection, financial stability and monetary policy.
FX REACTION
There is a considerable downside asymmetry between potential gains from a resounding victory for the “No” party and a close vote or surprise victory for the “Yes” party. If polls continue to suggest a narrowing of the unionists’ lead, markets should become more sensitive. GBP should weaken in the run-up to the vote and fall sharply if Scotland vote for independence. More specifically, analysts at Societe Generale expect that on the actual date of the referendum, a Scottish “Yes” vote would trigger an immediate fall in GBP, between 3 – 5%.
The question of whether a go-it-alone Scotland will be able to keep the GBP in partnership with the remaining parts of the U.K. has dominated the independence debate with all the major parties in London saying they would oppose it. Scottish First Minister Alex Salmond has argued they would change their view once negotiations began after a Yes vote and has said Scotland would refuse to pay its share of the U.K. national debt (some see this as high as GBP 140bln) if they didn’t give in.
EQUITIES
Scottish equities should suffer, with the effect on UK stocks expected to be mixed. Analysts at Barclays believe a “Yes” vote would have a minor negative impact on the UK stock market. However, they say independence would pose significant difficulties to both economies and hit several London-listed companies such as BG Group, RBS, Lloyds, Diageo and BAE Systems. The adverse impact would come through considerable uncertainty over the scale of potential currency fluctuations, the increased risk premium associated with a new, independent currency, and the limited belief in a Scottish central bank’s ability to act as a lender of last resort. Conversely, airline stocks such as easyJet, Ryanair and IAG should benefit as the “Yes” party have already committed to slashing Passenger Duty and possibly eliminating it altogether.
* * *
Media take, via AFP:
Supporters of the United Kingdom began a fightback on Monday to stop Scotland voting for independence in next week's referendum after an opinion poll put the separatists ahead for the first time. The shock survey put the "Yes" campaign two points ahead after months of a strong lead by unionists, causing the pound to slump to a 10-month low on fears that a break-up of the 300-year-old union was now a real possibility.
The leader of the Better Together campaign, Alistair Darling, insisted that other polls put the unionist campaign ahead but admitted it was "clearly very tight" ahead of the September 18 vote.
"We're in the position now where every voter in Scotland could potentially tip the balance in this referendum. But I am confident that we will win," the former finance minister told BBC radio.
'Ten days to save UK'
This weekend's poll has shaken up a campaign that until just a few weeks ago looked almost certain to end in defeat for the independence campaign. The YouGov poll in The Sunday Times newspaper gave the "Yes" camp 51 percent support compared to the "No" camp's 49 percent, excluding undecided voters. Six percent said they had not made up their minds. The two-point gap is still within the margin of error but Peter Kellner, the president of the YouGov pollsters which carried out the survey, said it was a major development.
"The 'Yes' campaign has not just invaded 'No' territory; it has launched a blitzkrieg," he wrote in a blog posting.
The poll finding was front-page news on British newspapers on Monday, with many running the same headline: "Ten days to save the union."
Queen 'horrified' by break-up
The poll has increased the pressure on British Prime Minister David Cameron, who agreed to a referendum but has been accused of failing to fight hard enough to keep Scotland in the UK.
Media reports suggest that some lawmakers in his Conservative party are discussing whether to call a vote of no confidence in the premier in the event of a "Yes" vote.
However, Cameron has insisted he has no intention of resigning and will lead the Tories into the next British general election in May next year.
Cameron spent the weekend with Queen Elizabeth II at her Scottish summer retreat in Balmoral, where the referendum is likely to have been a topic of discussion.
Officially the monarch has remained neutral, although some newspapers quoted royal sources as saying she is "horrified" at the prospect of a break-up of the UK.
* * *
Market Reaction
- Sterling drops most in 14 months vs USD to hit 1.6103, lowest since Nov. 2013
- European traders say no strong bids seen until 1.6000
- GBP/USD 1-mo volatility jumps most since Oct. 2008 to 13-mo high
- U.K. money markets pricing delay to BOE rate hike; with first full 25bps of tightening priced in July 2015 vs April 2015 on Friday
- Spike in GBP front-end rates stop out of short positions
- RBS and Lloyds shares extend decline; Z-spreads widen; both banks lend most to Scotland
Politics
- Sept. 8 - U.K. Govt Not Making Contingency Plan for Scottish Independence
- Sept. 8 - Former Chancellor Darling says confident ‘No’ campaign will win at Scots referendum
- Sept. 7 - Queen Elizabeth has “great deal of concern” about possible Scottish independence, Sunday Times reports
- Sept. 7 - U.K. Chancellor Osborne says says “there will not be a currency union”
- U.K. has action plan to give more power to Scotland
- Sept. 6 - Coalition policies help scots independence campaign, Brown Says
- Sept. 6 - Scottish independence backed by 51% in YouGov poll, Sunday Times reports
- Sept. 6 - A Panelbase poll shows the independence campaign still need to overcome a four-point deficit to triumph
- Sept. 6 - Cameron warns Scotland will be more vulnerable to terrorist attacks if it votes for independence
- Aug. 13 - BOE Governor Carney says Scottish independence could cause financial stability issues and BOE has contingency plans in place to address them during any potential transition
BBG Traders' Notes from Richard Breslow
- For all the huge movement in cable overnight, ranges elsewhere surprisingly small, if you read the headlines on flight to safety, haven buying, bonds up, not huge, stocks down, not huge; apart from the obvious pain points in currencies
- EUR/GBP 0.7900 we pointed out last Thursday as a huge chart level which we have now gapped well above, that’s become the big kahuna to trade against, I don’t think anyone knows what to do with this, what the polls really mean at the end; will certainly remain on top of market attention list over next 10 days or so
Research Roundup:
JPMorgan (fx strategists incl. John Normand)
- Between more ECB easing, tightening of Scottish referendum polls and rise in U.S. 2-yr rates, FX turnover spiked from depressed to almost normal level
- Trades remain highly tactical; take profits on long USD vs JPY, GBP and SEK; stay short EUR/USD and add limited euro-funded carry (EUR/BRL) and sell GBP/AUD
- GBP isn’t bearish at least vs EUR if Scotland votes no; prefer short on crosses like EUR and add to shorts vs AUD as polls on Scotland referendum tighten; bearish 1.63 GBP/USD one-touch triggered
Credit Suisse (strategists incl. Ric Deverell)
- EUR/USD downside likely limited near term in absence of more clarity on potential for broad-based QE from ECB; 3-mo forecast at 1.29
- Continued improvement in U.S. data and increasingly dovish ECB to drive bullish stance on USD
- Prefer shorting EUR/EM crosses such as EUR/ZAR, EUR/TRY, EUR/BRL and EUR/MXN
- Among U.K. data this week, expect July industrial production to grow 0.1% m/m vs 0.3% m/m in June, below consensus of 0.2%
- GBP may continue to come under pressure in near term; EUR/GBP to be biased lower
Citigroup (strategists incl. Steven Englander)
- Advanced retail sales most important U.S. data this wk; a strong print will continue to weigh on bonds
- NFIB small business survey potentially important; continued increases in 3-mo forward hiring trends will reinforce fears of inflation and higher U.S. rates
- Small risk from Fed speakers Plosser and Tarullo
- GBP may be supported if U.K. July industrial/manufacturing production shows economic activity expansion at start of 3Q even as concerns about Scottish referendum may weigh
- BOJ’s Kuroda not expected to give hints of additional easing
- Disappointment in Machinery orders would probably make markets factor the possibility of further BOJ action
- Australian employment report could prove a major factor in setting the tone for AUD; bigger shock would be on the strength
- Like short EUR/AUD into the release
Morgan Stanley (team incl. Hans Redeker)
- GBP/USD may fall to 1.46 in 12 months if event of Yes vote at Scottish referendum; cuts GBP/USD end-4Q forecast to 1.65 vs 1.73 prev, citing moderation in BOE rate hike expectations and cooling off in pace of U.K. recovery
- As monetary conditions normalize, traditional relationships between currencies and oil prices could return; may pressure NOK, COP, RUB and CAD
- NOK decline looks set to accelerate as economic support from high oil prices and oil sector investment falters
- Add AUD/NZD longs; weakening fundamentals, both domestically and internationally, now appear to work against the NZD; short vs AUD to reduce carry costs in current environment
- Dovish ECB policy does little to support EMFX; U.S. funding costs being of greater importance to the asset class
- Some exception found in EUR/CEE, though Russia/Ukraine tensions may weigh on CEE performance
- Await rebound in EUR/USD to re-enter bearish strategies given likely near-term constraints from extreme short positioning; forecast 1.20 in 2015
BNP Paribas (Michael Sneyd)
- Data and yields to continue supporting a strong USD
- Remain long USD/JPY from 103.20, with stop trailed to 104
- Enter short AUD/USD at 0.9345, target 0.9050, stop at 0.9510; AUD strength vulnerable from both extended positioning and relative fundamentals
- Norwegian CPI, quarterly regional network report have scope to support NOK ahead of Sept. 18 Norges Bank meeting; elevated long NOK positioning is a limiting factor
What To Watch
- Sterling may drop further ahead of Sept. 18 Scottish referendum, analysts say; see research roundup
- Market Should Price 50% Chance Scotland Says Yes: Deutsche Bank
- CEBR says an independent Scotland would begin with a budget deficit of at least 6.4% to GDP
- Scotland independence may halt work on renewable power projects that support GBP14b of investment and 12,000 jobs
- BOE Governor Carney due to speak at trade union congress in Liverpool tomorrow and will testify on Inflation Report the day after
Source: RanSquawk, Bloomberg, AFP
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Just do it and take the American aid.
We'll borrow it from someone.....if not we'll just print it.
You guys like reruns?
UK needs to hold this vote pronto before petrogold kicks-in and the Scots realize what they have - or the Scots will be telling the English what to do.
Although they are starting to wake up:
http://www.reuters.com/article/2014/02/24/britain-scotland-oil-idUSL6N0LT1OK20140224
"...But Alex Salmond, the leader of the pro-independence Scottish National Party (SNP), argued on Monday that oil and gas policy would be more stable in an independent Scotland and that Scots would benefit more personally from its riches.
He said there had been 16 tax changes in the North Sea in 10 years and 14 oil ministers in 17 years.
"People in Scotland and Aberdeen in particular just look across to Norway, where a country smaller than Scotland and more oil and gas dependant than Scotland has handled its resources infinitely better than Westminster (the British government)," Salmond told BBC TV.
"The reason they (UK politicians) want to hang on to Scotland's resources is that they've done so well out of them for the last 40 years."
On its own, Salmond said an independent Scotland could build up a wealth fund like Norway's which he said had put aside 100,000 pounds ($166,900) a head "for every man, woman and child".
"If we emulate what the Norwegians have done then we won't do too badly. ..."
Isn't Obama from Scotland?
Fuck the Queen!
After Obama's last visit he became the Last Queen of Scotland.
Just don't call his wife a tranny.....or you'll be dead.
Well after all these years good old Johnny Rotten may have had it right.
"God Save the Queen, she ain't no human being, they made you a moron, potential H bomb"
And in unreported news, he also said he had a bridge to sell.
"Braveheart" marathon on the tele until the vote takes place!
I hate to break this to UK leaders, but Scotland doesn't need your permission to use the GBP as it's currency. There is no way you can stop it.
An IRL example, a handful of shithole countries on the Balkans are using the Euro as a sole currency, and they are OK with it so far.
But that's not really the point, is it? They could use the USD if they wanted. But lose any say in policy. Or, worse, adopt the Euro as a condition of entry to the EU. Doesn't sound much like "freedom" to me.
The Nats are a republican, socialist group that do their best to pretend otherwise. If they campaigned on that basis, it might be a more honest vote.
Or they could adopt the Swiss franc and develop a banking system like the Swiss used to have.
Maybe use the ruble or yuan,
and throw everyone into a tizzy ???
Scotland can use any currency it wishes (pound, dollar, yen, yuan, etc), but has no control over that currency, and no 'lender of last resort' function. Without their own central bank function, they will not be able to borrow at anything like reasonable rates. I can see them going to a payday lender when they run out of 'other people's money'. The labour party and the nationalist party are both socialist in nature, as is the voting public in Scotland.
Under the Barnett Formula, Scotland is given significantly more money per person than the English regions, which is why they do not charge for college education (for Scots kids) or for medical prescriptions, unlike England.
They will not like the results of independence.
"The labour party and the nationalist party are both socialist in nature, as is the voting public in Scotland."
That's the killer statement in my eyes. There are no parliamentary seats held by the Conservatives (roughly Republicans) in Scotland, all seats are held by either Labour (roughly Democrats) or Nationalists. An independant Scotland would loose any force devoted to smaller government, lower taxes, independant thought. Independance is a march towards greater socialism/Marxism. Sadly that's the mindset of the majority of Scots. Spoken as Scot who has been living in the USA for 25 years and goes back regularly.
I hope they go independent, just to poke the Brits in the eye. Lacking the oil revenue, what's left of UK will have a much harder time playing the "we are the Empire" game and, more importantly, it will have fewer means to do so...
How as Iceland done since the great meltdown along with a big FU to EU bankers?
lets say they would accept 10 major currencies at the same time and they should be alright
lets say they would accept 10 major currencies at the same time and they should be alright
True but you can't print British pounds either. What happens when you need your own QE?
You let the bank fail.
You trying to tell the City of London what it can and cannot do? So far only Iceland has succeeded.
The Queen has already promised to name the new baby "Scotland" if they vote "NO" on referendum.
How come Cameron is so sure Scotland will see terrorists if they vote the wrong way??
The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.
H. L. Mencken
I already have a nice CFD trade ready to profit from this news!
How much gold does Scotland own?
Not sure; but they own a bunch of oil rights in the North Sea.
And they are the only part of Great Britain with a legitimate claim on the Artic. The rising powers are Russia, Canada, Norway, Denmark and US via Alaska. It's Alaska that could rumble, and not behind a dim bulb like Palin.
Canada has been a "rising power" since... forever. Doesn't look like it got anywhere too high though (pot induced states not included)...
Scotland? Who cares.
When California or Texas decide to bail...that would be news.
You should have stopped at Texas.
Either way, at least it would settle who we are. If they both left, that would confuse the idiots, wouldn't it?
How about having the South secede from liberal-land. What a concept. Go Scotland the Brave!
Many Scots are somewhere between liberal and outright Marxist,
so you might want to check your terms.
The Scottish banking system is very bankrupt and is on life support from London.
That is the real black swan here.
^^^ this.
Independence from the Crown doesn't equate to "freedom!" I would expect a top-heavy welfare state to emerge.
Can the following numpties really be independent of anything?
http://m.youtube.com/watch?v=ZgwELFu6Erw
America found that out in 1812. Then she became the official military of the Empire after WWII.
A way for the banksters to grab all the remaining oil in the ground.
The same thing was said about Iceland during the great meltdown, but that didn't stop them from giving a big FU to EU bankers. I bet if you polled Iceland, they think they are better off today then when they were EU serfs.
Scottish independence will be great for the Scots and very bad for the UK. The UK will still hold the debt that the Scots will no longer be burdened with and they will no longer be at the mercy of bankers devaluating their currency. But, on the other hand, the credit markets won't be kind to an independent Scotland seeking funding, which may not be such a bad thing, as it may have an unintended consequence such as forcing Scottish politicians to actually balance a budget.
Sounds like Iceland.
If I were to guess, I'd say that the nationalists are way ahead. But the MSM will try to instill the notion that it's almost a dead heat. Near voting day, they'll be a huge "rally" thrown by the unionists. They'll make up some story about who's funding this "grass roots" effort. Lot's of publicity. Come voting day, the unionists will squeak out a victory, thanks to Diebold. The rally will be used as the reason.
See Quebec.
That's exactly how every election in the U.S goes down. It's funny how people still believe that hey have a choice.
Not having to fund the royal family anymore should count for something.
getting out of the cabal fold is definitely a bonus. Plus, no need to feed a useless bunch of Royals that produce babies and make you feed more of them. End of shackles of freeloaders.
Scotland I'm sure will do fine as they have many friends around the globe to align with.
Are Scottish elections as honest as Amerikan elections?
Better.....I don't think they have Diebold.
We could send Eric Holder to monitor the Scottish election. That should allay all concerns.
Send him to the embassy......I'll make a cheesy video.
Whip up the locals......let him shoot his way out.
He doesn't believe in guns, except when he sends them to Mexico.
Possibly ....
The problem with Scottland is that it's full of scotts!
Maybe Renton's viewpoint is about to change?
Queens? This is the 21st century. We have queens and trannies. We don't have Queens. Let her make believe world be gone.
I think I'll buy a bottle of Lagavulin. One can never be too prepared for independence.
Aye lad..and listen to Ewan....he tell's it like it IS!
"It's SHITE being Scottish! We're the lowest of the low. The scum of the fucking Earth! The most wretched, miserable, servile, pathetic trash that was ever shat into civilization. Some hate the English. I don't. They're just wankers. We, on the other hand, are COLONIZED by wankers. Can't even find a decent culture to be colonized by!"
https://www.youtube.com/watch?v=wqgkZDbe4Xk
Everything is always supposed to get bigger and more centralized. This Scottish thing is just bizarrely terrifying. Monstrous. Hideous. I feel like I'm going to throw up.
Scotland will be a bright beacon for other nations in Europe without a state. Basques, Catalans, and Flemiings are the most likely to achieve their independence in the next few years or decades and the Scottish vote will be seen as the starting point. Many people from larger countries fail to understand what it is like to be dominated by others who are so different from you and who often even despise you. It is better to be the head of a mouse than the tails of a lion.
THis is nohing new in Europe. Norway broke off from Sweden in 1905, the Austro-Hungarian Empire after WWWI, and Eastern Europe has seen the birth of more states (though the ex-Yugoslav ones are a special case given the history of how Yugoslavia was stitched together in the first place and how it was run). Western European states have been better at wiping out minority languages and groups than the East European ones. When a people really want independence and are determined to get it, they usually get there, even after decades or centuries.
Go Scotland!
it is very funny cam moron talks of scotland and terror threats.
isis in the highlands how far is glasgow from iraq?
why is isis coming to the lochs and the glens ?
anthing to do with the trillions of pounds worth of oil off harris island an oil discovery using bernard edlunds haarp technology covered up by westminster.
isis like oil and gas is it not funny how isis is not going after the gaza oil and gas or the israeli leviathan gas and oil fields.
and if your into pillage and rape what about qatar and saudi much closer than scotland A
Didn't Quebec try this whole independence thing once upon a time?
way out of line to succession
If they want to boot the queen, so be it. I am not a fan of rule by birthright.
But I have to laugh at the minions when I read this.
We know that borders (like taxes) are for the little people.
The .01% and mega-corps recognize neither.
All that will happen when Scotland secedes is that the promises made will become excuses as to why not.
Scotland will be another Ireland. Independent enough to vote for dog catcher, but the real power will (still) be in London or more accurately Berlin.
A whole nother nation? Fire up the Reserve Weasel Puppets! What, we're out? Do we have to let them in on the Cloning Program?
The lack of quotation marks are due to the possibility of error using laser modulation on the Queen's kitchen window to eavesdrop.
But we're preeetty sure that's what she said. It was on the phone, she was doing the dishes, we didn't get the Tony.
- Agent MI69
The Scots are at least brilliant marketers. They've convinced tens of thousands that their whiskey is better than the whisky of Ireland. "Scotch" has a certain cache while whiskey/whisky - the same thing - does not. But here's the thing - there are a number of Irish and American whiskies/bourbons that are better than any fucking thing coming out of Scotland.
http://www.forbes.com/2007/03/12/drink-whiskey-irish-forbeslife-cx_pl_03...
You just gotta stay single malt
Braveheart, Rob Roy, and today Outlander, can the cinima be so wrong?
So let's see. Scotland will be independent, but it'll still use GBP, it'll still have the Queen as head of state, there'll be chummy border crossing agreements, and best of all Scotland will still be part of the EU, so its defense, foreign policy, farm policy, trade and budget policies will still be made elsewhere.
What exactly is expected to change? Just the flag and the national anthem?
so only germany an france will be left as major powers in the EU? could be worse.
Not another different currency symbol ! Remember the brouhaha (and expense) with the € .
What will they call it ? The culloden ?
Nah look...Here is the problerm for the UK.
It's clearly not going to be a landslide for the union... ~50% of Scots want out.
the best thing about this Mcdowell vs Mcallagher clannish frenesy is that Sean Connery looks good in his kllt !
Play on Macduff of : "Scotland for the haggis lovers!"
Shaken and not stirred !
The Scots could either make a resounding triumph out of independence, or a miserable disaster.
They have enough intellegence and talent scattered across the world to know they could transform into the most dynamic country.
If the Northwest passage becomes naviable by sea (who cares whether it is by global warming or just a natural change in long term climate cycles), Scotland's deep water ports could take all Oriental trade to Europe.
Scotland's fishing grounds could be taken back off Europe.
Scotland's world-renowned expertise in recovering inaccessible oil could be funded properly by an innovative banking sector (they should shut down RBS on day one and refuce to take on its debts).
Scotland's heritage of invention could be re-energised by an education system cleared of all the idiots who have suffocated it.
Scotland's agriculture could become self-sufficient within 5 years.
Scotland's politicians could be stripped of power, and a new constitution limiting taxable revenues to a sensible proportion of gdp. Scotland could become the first industrialised country to tear up its pensions liabilities, and free itself from debt.
It could create a new banking system outwith the western debt model.
Or it could just stay in the pub and order another pint.
A useless bunch of brainwashed politicians
A suffocating grip from the worst kind of nanny-state socialists in local government, education, trades unions.
A cowardly, chip on he shoulder press and tv media.
A smug legal system -especially the city lawyers and the urban police.
A matriarchal society, do the mothers have fear or confidence in the futire to decide how to vote.
The good thing about a small country, is that there aren't that many people you have to expose and remove.
Could be a model for the future, if the Scots believe in themselves. Or a sign that there is no hope.