Voting has begun in Scotland as the country decides on whether to stay with the UK or become independent. The last polls before ballots opened gave the no campaign a slight lead. But as Ivor Bennett reports, markets are bracing themselves whatever the outcome.Reuters
The Toronto stock market was barely changed Thursday, as Scotland heads to the polls in a referendum vote that has the potential to send ripples across global markets.
The S&P/TSX composite index dipped 21.54 points to 15,437.34, pulled down by gold, metals and material stocks. The Canadian dollar found strength, jumping 0.40 of a cent to 91.29 cents (U.S.).
Scots will be deciding whether they want their country to leave the United Kingdom, with the referendum results expected early Friday before markets open in North America. Polls have indicated the results are too close to call.
Traders expect that if Scotland stays as part of the U.K. it would remove a lot of the uncertainty that has developed on equity markets and has helped drive up the value of the U.S. dollar. Some traders have suggested a vote to leave Scotland could put a damper on the global economic recovery.
"There would be an effect. If they vote Yes, there would be an effect that is not currently factored into markets," said Paul Taylor, chief investment officer of asset allocation at BMO Asset Management.
He said that a Yes vote would raise questions in a number of jurisdictions, and about whether Scotland would be able to be admitted into the European Union.
Overseas, the European Central Bank has launched a new stimulus program in hopes of getting banks to lend, an effort to revive a stalling economy. On Thursday, the ECB for the 18-country euro zone handed out €82.6-billion in ultra-low interest loans to 255 banks.
On Wall Street, markets headed higher with the Dow Jones industrials ahead 88.97 points to 17,245.82, after closing at a record high on Wednesday. The Nasdaq was up 23.81 at 4,586, and the S&P 500 index advanced 8.54 points to 2,010.11.
The U.S. markets got a boost after the U.S. Federal Reserve signalled Wednesday that it still plans on keeping its key interest rate at a record low "for a considerable time," as long as inflation remains under control. The central bank said it will keep its benchmark rate near zero until it sees consistent growth in wages and in the job market.
The Fed also said it will make another $10-billion cut in the pace of its monthly bond purchases, which have fuelled stock markets and kept long-term borrowing rates low. The program is still slated to end in October.
"The key is that it looks like the Fed is going to take a pragmatic, data-driven approach to the gradual unwinding of its extraordinary easy monetary conditions," said Taylor.
"The markets takes great comfort from that. They're on story and there's a sense the Fed isn't going to be what will cause this party to come to an end."
In corporate news, Penn West Petroleum reported a net income for the second quarter of $143-million, or 29 cents (Canadian) per share, compared with a net loss of $53-million, or a loss of 11 cents per share, in the same quarter last year.
The oil and gas producer had delayed its second-quarter earnings due to the restatement of past financial reports after finding some accounting irregularities. Penn West shares were more than eight per cent higher, or 68 cents, to $8.41.
Air Canada said it will begin to charge a $25 fee for first checked bags on domestic flights. The fee applies to passengers booking the lowest economy class Tango fares, as of Thursday for flights as of Nov. 2. Shares in Air Canada rose 14 cents to $8.76.
On the commodity markets, December bullion was down $9.80 to $1,226.10 (U.S.) an ounce. Gold stocks were the heaviest weight on the TSX at the open, with the sector coming in as the largest decliner, down by 1.72 per cent. The October crude contract on the New York Mercantile Exchange was down 46 cents to $93.96 a barrel, while December copper was down four cents to $3.10 a pound.