1st Oct 2013 16:28
LONDON (Alliance News) - The UK's main equities indices closed mixed Tuesday, with the blue-chip FTSE 100 ending slightly down, on the day the US woke up to find its government had all but shut down after politicians failed to agree on a budget.
The FTSE 100 closed slightly down at 6,460.01, the FTSE 250 ended up 0.4% at 14,966.40, while the AIM All-Share closed down 0.7% at 787.98.
However, the pound rose as the budget deadlock hit the dollar, while gold and bonds fell sharply in late trade as US stocks started to climb again amid hopes the shutdown will be temporary.
Federal workers idled by the US government shutdown will be returned to work as soon as possible, President Barack Obama promised in an open letter posted on government websites Tuesday.
"I will continue to do everything in my power to get the House of Representatives to allow our government to reopen as quickly as possible, and make sure you receive the pay you have earned," he wrote.
At least 800,000 federal workers had reported for work and had four hours to get their affairs in order before being forced to head home. Workers considered "essential" who deal with national security and other key areas will remain on the job without pay.
Obama's pledge to end the deadlock as soon as possible helped lift US stocks early Wednesday and gold to fall 3.5% quickly in afternoon London trade.
That caused gold mining stocks in London to fall. Fresnillo was the biggest faller on the FTSE 100, closing down close to 5% at 924.5 pence.
The miner overtook Unilever, which had previously topped the losers table after warning late Monday that it was seeing weakness in demand from emerging markets. The consumer goods company ended the day down 3.8% at 2,348.2p.
Miners also topped the loses on the FTSE 250 by the end of the day, with Polymetal International closing down 4.4% and Kazakhmys closing down 4.1%.
The US budget problems dominated forex markets, with analysts estimating the shut-down is costing the US USD300 million a day. On top of that, there are looming negotiations on the country's debt ceiling, with the Congressional Budget Office estimating that the current ceiling will be hit between October 22 and 31.
The pound reached a high of USD1.6260, close to its high for the year, and also rose against the euro, with the cross rate recording a low of GBP0.8333, also close to the best levels of 2013.
Weakness in the euro was driven by the ongoing political troubles in Italy and eurozone economic data that missed expectations. German unemployment numbers recorded a surprise gain in September, climbing by by 25,000 against a forecast decline of 5,000. The headline rate of unemployment in Europe's biggest economy is now 6.9%, up from 6.8%. German, Greek, Spanish, and Italian manufacturing PMI's all missed forecasts too.
There are some big data releases scheduled for the remainder of the week, with jobless claims due on Thursday and non-farm payrolls on Friday. However, the numbers that would normally be watched closely in light of the Federal Reserve's linking of the end of stimulus programs and possible rate hikes with the jobless rate, could be delayed as government agencies may not be at work to report the numbers.
Wednesday's European calendar includes the ECB rate decision at 1245 BST and subsequent policy statement and press conference at 1330 BST. Also in the calendar is UK construction PMI at 0930 BST, EU producer price index at 1000 BST and the ISM New York manufacturing index at 1445 BST.
It's a big day for UK retailers with Tesco reporting interim results and Sainsbury giving a trading statement.
David Cameron will give his speech at the Conservative Party annual conference, while Italy will be back in focus as parliament holds its no confidence vote.
By Jon Darby; [email protected]; @jondarby100
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