Market Commentary: British pound crashes to 10-month low

Markets are trading flat this morning after the number of Scottish voters in favour of independence from the UK increased. The latest poll shows that of all the adults surveyed, 39% are backing a "No" vote, 38% a "Yes" vote and 23% are undecided.  The Scottish referendum will take place on 18 September.

The pound crashed to a 10-month low on Monday and £2.3 billion was wiped off the value of the six FTSE-100 companies based in Scotland on the first day of trading since a weekend poll put the Yes campaign ahead for the first time.

RBS and Lloyds remain in the spotlight. Investors are becoming increasingly concerned about the outcome of the Sept. 18 referendum. RBS which is 80% owned by the government, is the second-largest lender in Scotland behind Lloyds Banking Group.

While the UK government has sold 7.4 billion pounds of Lloyds shares, it has been unable to sell its stake in RBS as the stock remains below the price where taxpayers will break even on their 45 billion-pound bailout in 2008.

If there’s a Yes vote it will undoubtedly have to defer the timeframe for the stake being placed until things become clearer about the future of Scotland and the shape and structure of RBS. Equally, it’s difficult to believe investors would be happy to take part in a further placing of Lloyds with their future being very uncertain.

Moving on to the Russia-Ukraine conflict, European Union governments abruptly put on hold for at least a few days new sanctions against Russia, allowing more time to assess the viability of a cease-fire in Ukraine without risking further trade retaliation by the Kremlin. The EU’s second package of economic penalties against Russia was delayed late yesterday in Brussels by the bloc’s 28 governments, which approved the measures in principle while stopping short of giving the green light for their publication in the Official Journal and entry into force.

In corporate news, Apple is in the spotlight once again. Today, the Company is hosting a special media event-debut of its latest iphones. Apple’s prospects seem a lot brighter than they were the last time Tim Cook introduced an iPhone.

When Chief Executive Officer Cook unveiled two new smartphone models 12 months ago, Apple’s stock was slumping and the company was losing market share to Samsung and low-cost manufacturers such as Xiaomi Corp.

Questions abounded about whether Apple could keep innovating without co-founder Steve Jobs. Fast forward to a year later and the company’s stock is flirting with a record high. Anticipation is building for the bigger-screen iPhones, a wearable device and a mobile-payments system. Even the recent stolen pictures of

naked celebrities such as Kate Upton from Apple’s iCloud service have done little to derail investor enthusiasm.

Ikea Group, the world’s largest furniture seller, said full-year sales rose 3% as consumers flocked to its online stores and spending accelerated in China. Revenue increased to 28.7 billion euros ($37 billion) in the twelve months through August. The flat-pack furniture retailer’s same-store sales gained 3.6%. Ikea Group, which owns the majority of the world’s Ikea stores, is seeking to double sales by 2020 by improving existing shops, opening new ones, expanding online offerings and introducing new collections more frequently.

JP Morgan added Valeo to its focus list because they see the company as having superior order intake, expected higher margins from future orders and low exposure to Russia and Latin America.

This article was issued by Calamatta Cuschieri, visit www.cc.com.mt for more information.

The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.

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