Britain's FTSE underperforms as Scottish uncertainty weighs on market

LONDON (Reuters) - Britain's top share index underperformed gains on rival European markets on Wednesday, as the uncertainty raised by Scotland's vote on independence pegged back its stock market.

The blue-chip FTSE 100 index edged down by 0.1 per cent, or 5.44 points, to 6,786.80 points going into the close of trading.

Engineering conglomerate Smiths Group was the worst-performing FTSE stock in percentage terms, falling 5 per cent after it reported a steep fall in annual profits and said it was not planning to sell its medical unit.

The FTSE was the only major European stock market to fall into negative territory, with the British market underperforming gains of 0.4 per cent on Germany's DAX and 0.6 per cent on France's CAC.

European equity traders took encouragement from gains on Wall Street, which rose on speculation that the U.S. Federal Reserve will maintain a pledge on low interest rates later in the day. However, traders saw the Scottish vote - due on Sept. 18 - as preventing the FTSE from latching onto the advances made elsewhere in Europe.

"The market is expecting a 'No' vote against Scottish independence, but no-one really wants to get too involved in the market ahead of the Scottish vote," said Strand Capital managing director Kyri Kangellaris.

Scottish supporters of staying in the United Kingdom were 4 percentage points ahead of those in favour of independence, three different opinion polls showed, although the final result is still seen by some as too close to call.

"Until clarity emerges well after the vote ... it may be prudent for investors to hedge their exposure to UK debt and equities," said Viktor Nossek, head of research at Boost ETP, a provider of exchange traded products (ETPs). Richard Griffiths, associate director at Berkeley Futures, said: "I think it will be a 'No' vote. If it's a 'No' vote, expect the FTSE to go up by around 50 points, but if it's a'Yes' vote, expect the FTSE to fall 200 points."