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Monday 21.00 BST. Sterling fell to a 10-month low on Monday, as investors shunned the currency after the campaign for a Yes vote on Scottish independence took the lead in a poll that left the pro-union camp scrambling to head off a surge in support for a breakaway from Britain.

On Wall Street, the S&P 500 ended lower on the day, led by declines in financial and energy stocks. The index fell 0.3 per cent to 2,001.51 points.

On Friday, the US benchmark closed at a record 2,008 after below-forecast jobs data convinced dealers that the Federal Reserve will be in no great rush to tighten monetary policy.

Asian bourses were mildly mixed as investors absorbed disappointing Japanese GDP data and solid Chinese export numbers, while in Europe, Germany’s Dax also started the week on a softer tone, closing 0.1 per cent up after a dip earlier in the session.

But UK assets had issues closer to home to worry about. The pound fell over 1 per cent to as low as $1.6152, its weakest level since last November, after polls over the weekend suggested a small majority of Scots may vote to leave the UK.

“Recent history would suggest that a move towards $1.56 or lower cannot be excluded in GBP/USD if Scotland does leave the union,” said CitiFX strategist Valentin Marinov.

Lena Komileva, chief economist at G+ Economics, said: “The difference between a binary Yes and No outcome on the morning after the Scottish referendum, to be held on September 18, is so vast that it has been impossible to price or trade in financial markets.”

“UK total financial liabilities to the rest of the world account for a mammoth 400 per cent of the UK’s GDP. Thus, how foreign investors perceive domestic political risk matters.”

Traders snapped up currency options, increasing bets of more sharp moves for sterling. The one-month implied volatility for GBP/USD has nearly doubled over the past week or so – though it had been near record lows in line with similar products for other crosses.

A weaker pound might be expected to lift London’s FTSE 100, because so many of the index’s constituents make a large proportion of their sales in dollars. But it appeared such a consideration was being overwhelmed by the political uncertainty, and the FTSE 100 fell 0.3 per cent as financials with a large exposure to Scotland led the declines.

UK government debt underperformed peers, too, with the 10-year gilt yield little changed at 2.48 per cent. The Scottish National party has said it will refuse to take on any of the UK’s debt obligations if it cannot keep the pound.

However, more generally, fixed income investors seemed reluctant to challenge the prevailing global trend of yield suppression, powered by the ultra-loose monetary policies of central banks.

Currently at the forefront of this strategy is the European Central Bank, which last week delivered another batch of measures to boost liquidity in order to tackle meek growth and low inflation.

The euro fell earlier to a 14-month low at $1.2944, and 10-year Bund yields were off 1bp to 0.92 per cent, just a few basis points above record lows.

US 10-year Treasuries reversed earlier gains and fell, pushing yields up 1bp to 2.47 per cent. The dollar index rose 0.7 per cent to 84.31, its highest since July 2013, a surge that reflects investors’ relative optimism over the US economy.

In commodities, copper rose 0.8 per cent to $7,028 a tonne, in a mostly positive metals market.

But Brent crude fell to trade at $99.77 a barrel – a 14-month low – after data showed China’s oil imports fell 2.4 per cent in August, against expectations for a 1.7 per cent rise.

The news featured within China’s overall trade report. Total exports rose 9.4 per cent year on year in August, ahead of economists’ expectations of a 9 per cent rise.

However, this marked a slowdown from the previous month when exports rose at an annual rate of 14.5 per cent. China’s trade surplus increased to $49.8bn in August, beating economists’ estimates of $40bn and up from $47.3bn in July. China’s stock market was closed for a national holiday.

Tokyo’s Nikkei 225 was up 0.2 per cent and the yen was 0.2 per cent softer against the dollar at Y105.32 as Japanese assets were little moved by a downward revision of the country’s second-quarter gross domestic product data.

GDP was revised down to an annualised fall of 7.1 per cent in the three months to July, surpassing economists’ expectations of 7 per cent and worse than the original report of a 6.8 per cent drop.

It was the lowest reading since the first quarter of 2009, and analysts said it was likely to fuel fears that Japan’s sales tax increase in April was hurting the economy more than originally thought.

Reporting by Jamie Chisholm in London, Jennifer Thompson in Hong Kong and Vivianne Rodrigues in New York

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