European shares jump as Scotland says No

European equities surged on Friday, with a key index hitting a 6.5 year high after Scotland’s decision to vote against independence buoyed equity markets and eased concerns about similar separatist movements in Spain.

The pan-European FTSEurofirst 300 index was up 0.8 per cent at 1,408.54 points after rising up to 1,410.93, its highest since 2008. The euro zone’s Euro STOXX 50 rose 0.6 per cent, Germany’s DAX gained 0.7 per cent and Britain’s FTSE 100 was up 0.7 per cent.

The markets witnessed a relief rally after Scotland spurned independence in a historic referendum that threatened to rip the United Kingdom apart, sow financial turmoil and diminish Britain's remaining global clout.

Spain’s IBEX outperformed with a 1.3 per cent rise, helped by a fall in Spanish 10-year government bond yields as markets viewed Scotland’s No vote as having reduced prospects of a stronger push for a breakaway in Catalonia.

“The result is also a tonic to financial markets in Europe - where politicians in Spain in particular will be relieved that Catalonian secessionist fires have not been further stoked,” Guy Ellison, head of equities at Investec Wealth & Investment, said.

The northern Spanish region of Catalonia, accounting for a fifth of Spanish economic output, is a wealthy region with its own language and culture. Its long-standing independence movement has grown over the last decade, fuelled by the economic crisis and a refusal by Madrid to meet regional demands.

Despite the outcome in Scotland that was widely seen as a setback for the cause of Catalan independence, the region’s separatist-led government was expected to announce plans later on Friday for a non-binding referendum, in defiance of Madrid.

Some fund managers remained cautious.

“There will be a continued pressure from Catalonia to take control away from Madrid and this will build over the medium term, possibly to its own referendum if the Spanish Government allows one,” Lorne Baring, managing director of B Capital Wealth Management, said.

The STOXX Europe 600 Banking Index rose 1.2 percent, helped by gains in UK lenders Royal Bank of Scotland and Lloyds - which owns Bank of Scotland - on relief following the Scottish vote. RBS and Lloyds, up 3 per cent and 1 per cent respectively, had fallen in the build-up to the Scottish vote, due to concerns that any decision in favour of independence could make investors uncertain about the future regulatory framework for such banks.

The Scottish Yes campaign backing independence, had gained ground over the last weeks but had been continuously hindered by concerns over what currency an independent Scotland would use.

“For the markets in general, the Scottish result is probably the best outcome because the Yes vote winning was really not priced in and that could have caused chaos, with contagion to Europe,” said Clairinvest fund manager Ion-Marc Valahu.

Germany's SAP fell 3.2 percent, the top loser in the FTSEurofirst 300 index, on concerns over a price tag of $7.3 billion in cash it would pay to buy US expenses software maker Concur. Reuters