Global markets rally on news of U.K. remaining intact

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The prospect of the United Kingdom remaining intact after a tense Scottish independence referendum sent the pound soaring in the overnight Asian markets and triggered a stock market rally in London.

The rally in the Asian markets began well before the referendum's final tally was confirmed just before dawn London time; the early exit polls had suggested that the No side had won the vote and investors were not disappointed. The referendum handed 54 per cent of the votes to the No side, putting Scottish independence, if not devolution, off the table.

(Scotland votes No: What happens next? Read The Globe's primer)

In Tokyo the pound was up strongly against the dollar, hitting $1.65 (U.S.). It was also up against the yen and the euro, taking it to a two-year high against the latter.

In London, the benchmark FTSE-100 index climbed almost 1 per cent, after a winning day on Thursday. British 10-year sovereign bonds rose marginally but the pound gave up some of its gains even if its hit a two-year high against the ailing euro. In mid-day European trading, the pound was worth $1.64.

The pound had been rising in the last three days as traders took the view that the No side was likely to win. Currency traders had shorted the pound in the weeks leading up to the referendum, then reversed that trade in anticipation of a No vote. The profits on the trade could be vast.

The big winners in Friday's London market rally were the Scottish financial institutions, including Royal Bank of Scotland, some of which had vowed to shift their headquarters to England if Scotland decided to go it alone. RBS was up 3 per cent while Lloyds Banking Group was up 1 per cent.

The banks' fear was uncertainty over the currency an independent Scotland would use. The Westminster parties had said that an independent Scotland would not be offered a currency union with the U.K., meaning any currency used in Scotland would lack the backing of the Bank of England.

Economists said the No vote was bullish for British business in general. In a note, ING Financial Markets said "the reasonably conclusive No vote signals a rapid return to some sort of normality, with the potential for some pick-up in business investment in the coming months as postponed investments are implemented."

Prime Minister David Cameron celebrated the victory shortly after the poll results were released. But recognizing that nearly half of Scottish voters wanted to break away from English rule, he promised more power for Scotland, such as extra tax-raising and spending powers.

Negotiations with the Scottish National Party (SNP) for greater devolution, however, could be fraught since the Scottish nationalists suffered a fairly narrow defeat.

In recent days, a few frontbench and backbench Conservative MPs warned Mr. Cameron not to be overly generous with gifts for Scotland, for fear that it would hurt the U.K. taxpayer. They noted that Scotland already enjoys transfer payments that are higher than those to Wales, which is a poorer region than Scotland.