European stocks edged up in early trade on Thursday, tracking gains on Wall Street after the US Federal Reserve renewed its pledge to keep ultra-low interest rates for a "considerable time".
However UK stocks underperformed, losing ground as the voting got underway in Scotland’s referendum on independence, keeping investors on edge ahead of the result, expected early on Friday.
A YouGov poll for the Times and Sun newspapers showed Scottish support for staying in the United Kingdom at 52 per cent with Scottish support for the Yes campaign backing independence at 48 per cent.
"Overall, equity investors have been quite sanguine about the referendum, we haven't seen any sell-off in UK shares ahead of the vote, although we've seen investors hedging the currency risk in their portfolios," Saxo Bank trader Pierre Martin said.
The overnight sterling/dollar implied volatility rose to a high of 34.75 per cent on Thursday, almost 10 times levels seen a month ago, having closed on Wednesday at around 12.75 per cent, as investors stepped up hedging against sharp fluctuations over the next 24 hours.
The vote will close at 10 pm and the first area results are likely to come out a few hours after that, although the final result may not be clear until about 5am on Friday.
The FTSEurofirst 300 index of top European shares was up 0.3 per cent at 1,388.56 points in early trading on Thursday.
London’s FTSE was down 0.1 per cent, while Germany’s DAX index gained 0.5 per cent, and France’s CAC 40 rose 0.3 per cent.
Shares in Swiss pump maker Sulzer featured among the top gainers, up 7.7 per cent, after the firm said it is in talks on a potential tie-up with US compressor and turbine maker Dresser-Rand, a deal that would create a machinery company with a combined market valuation exceeding $10 billion.
Germany’s Bayer added 5 per cent after saying it plans to float its plastics business on the stock market, a unit with an estimated value of about€8 billion .
On Wednesday, the Federal Reserve reaffirmed its commitment to keep US interest rates near zero for a “considerable time,” and repeated concerns over slack in the labour market, standing firm against calls to overhaul its policy statement.
However, the Fed also indicated it could raise borrowing costs faster than expected when it starts moving. The central bank’s new rate projections suggested officials were positioning themselves for a potentially faster pace of rate hikes than they had envisioned when the last set of forecasts was released in June.
Reuters
