7th Oct 2013 16:33
LONDON (Alliance News) - London's main equities indices all ended lower Monday amid a global stock market sell-off as the US government shutdown entered a second week and fears grew that the US would leave it until the last minute to raise the debt ceiling and avoid the possibility of a default.
Taking the lead from Asian markets which closed down, indices in London opened lower Monday and despite performing slightly better in the afternoon, all closed lower. The FTSE 100 closed down 0.3% at 6,437.28, the FTSE 250 closed down 0.5% at 14,770.99 and the AIM All-Share closed down 0.1% at 781.70.
Personal goods performed the worst over the day, the FTSE 350 sector index losing 1.3% after Burberry Chief Executive Angela Ahrendts warned that the slowdown in China may be the new reality rather than a temporary slowdown. The luxury clothing group closed down 1.7%.
Industrial metals performed best, the FTSE 350 sector index closing up 1.5%, tracking gold and metals prices higher. Mexican based metals miner Frensillo was the top blue-chip gainer, closing up 1.9% as UBS upgraded the stock to Buy, from Neutral.
Gold gained almost 1% today while the dollar remained under pressure as the continuing US shutdown weighed on investor sentiment.
In a day bereft of economic data, speculation and commentary on the US budget shutdown continued to dominate. Democrats and Republicans seem no closer to ending the budget stalemate while the debt ceiling "deadline" - predicted by analysts to be between October 17 and the end of the month - edges closer.
"Some analysts have estimated that default is likely by November 1st when the Treasury Department is scheduled to make nearly USD60 billion in payments to Social Security recipients, Medicare providers, civil service retirees, and active duty military service members," said Jonathan Pryor at Investec Corporate Treasury.
Some furloughed US Department of Defence workers are returning to their posts after a bill covering back pay for federal workers was approved, but the top Republican in the US House of Representatives on Sunday destroyed any hope that the stalemate would end soon.
Speaker of the House John Boehner said without negotiations there would be no vote on budget legislation.
In its first official reaction to the political stalemate, the Chinese government warned the US that the shutdown and the prospect of Washington's first ever default is threatening the value of US investments. China is the biggest holder of US treasuries in the world.
Most experts think US lawmakers will reach an eleventh hour deal to ensure there is no default, but even that could be damaging to reputation.
On the economic calendar Tuesday, the Royal Institute of Chartered Surveyors house price index is set to be released overnight, along with the British Retail Council shop price index. German and French trade balance numbers are due in the morning along with Italian GDP and German Factory orders.
In the afternoon, private sector US numbers may provide increased interest in light of the lack of official data due to the shutdown. At 1230 BST there's a business optimism index from NFIB, at 1355 BST the Redbook index will provide the latest retail sales data, and at 1500 BST another economic optimism reading, from IBD/TIPP.
In the UK corporate calendar, there's a management statement from recruitment company Robert Walters, production results from miner Ferrexpo and a trading update from specialty chemicals company Victrex.
By Jon Darby; [email protected]; @jondarby100
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