September 18, 2014 / 2:56 PM / 3 years ago

UK markets swinging towards Scottish "No"

* Investors grow confident “No” vote will win

* All but one of basket of Scottish-based stocks higher

* Sterling tops $1.64 for first time in two weeks

* Yes vote would be barrier to Bank of England rate rise

By Anirban Nag and Sudip Kar-Gupta

LONDON, Sept 18 (Reuters) - British financial markets placed a raft of late bets that Scots would vote “No” to independence on Thursday, pushing the pound and Scottish-based stocks higher in the final hours of polling.

Since a poll almost two weeks ago showed a surge in support for the “Yes” campaign, worries of a vote that would send a shockwave through Britain’s political and financial system have weighed on UK markets.

But sterling has steadily recovered this week on the back of a series of surveys showing the “No” vote holding on to its slender lead.

The latest poll on Thursday, published by London’s Evening Standard newspaper as Scots began to vote, showed 53 percent in favour of the status quo, versus 47 percent for independence. In contrast to previous polls, undecideds totalled only 4 percent.

“It seems people are growing reasonably confident of a ‘No’ vote in Scotland,” said Ian Gunner, portfolio manager at Altana Hard Currency Fund.

Sterling gained more than 0.7 percent against the dollar to trade at $1.6401. That compared to a 10-month low of $1.6051 struck last week. Sterling hit its highest against the euro in two years.

Out of 12 Scotland-based stocks in the FTSE 350, only one, engineer Weir Group, was trading lower, down 0.2 percent. The others were up between 0.1 percent and 1.96 percent.

Securequity sales trader Jawaid Afsar said he had bought shares in power generation company Aggreko, which is headquartered in Glasgow.

Aggreko was up 0.5 percent while major Scottish financial institutions such as Royal Bank of Scotland and Aberdeen Asset Management fared better, rising by 1.3 and 2 percent respectively.

“It seems that the market is convinced that Scotland will remain in the UK,” said Afsar.

Ten-year UK government bond yields edged up 8 basis points to a day’s high of 2.60 percent. A vote for independence has been seen as preventing the Bank of England from making good on market expectations for a rise in interest rates by early next year. (Additional reporting by John Geddie and Marius Zaharia; writing by Patrick Graham; editing by John Stonestreet)

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