30th Sep 2013 16:40
LONDON (Alliance News) - London's main stock indices closed firmly down Monday as the deadline for the US government's potential shut-down draws ever closer and political tensions in Italy rise.
With Republicans and Democrats refusing to alter their stance with regards to US President Barack Obama's healthcare law and adding it to the funding bill yesterday, investor confidence has been hit hard Monday. According to reports, shut-downs in the mid 1990s, cost the country USD1.4 billion. Congress has until Tuesday, 0500 BST, to agree on a new budget.
Congress is also running out of time to negotiate the US debt limit, knocking traders. With the US Treasury expected to hit its USD16.7 trillion ceiling by October 17, failure to increase the limit may lead to the US Government's credit rating being downgraded.
In Italy, Prime Minister Enrico Letta called Sunday for a vote of confidence to take place Wednesday after his party's relations with former prime minister Silvio Berlusconi's party sank to a new low. Berlusconi ministers have said the conditions necessary for them to remain in the government no longer exist; Letta's negotiations with such rebel members elevate in important ahead of the vote.
Italian President Giorgio Napolitano, however, has announced that he does not wish to dissolve Parliament, maintaining hope that a new coalition can be formed.
The FTSE 100 closed down 0.8% at 6,462.22, the FTSE 250 down 0.1% at 14,908.18, and the AIM All-Share index closed down 0.4% at 793.26.
This sentiment is shared globally. The CAC 40 closed 1% lower, at 4,143.44, and the DAX closed down 0.8% at 8,594.4.
Similarly, at the close of the UK equities markets, Wall Street is heavily lower. The Nasdaq is down 0.2% at 3,772.72, the S&P is down 0.5% at 1,683.49, and the DJIA is 0.6% lower at 15,163.64.
There was promising data released from the US. The Chicago Purchasing Managers Index rose to 55.7 compared to a reading of 53.0 in August, ahead of the consensus forecasts of 54.0, according to FXstreet.com. However, amongst the political turmoil, this was largely overlooked.
At the individual equity level, house builders were notable gainers on both the FTSE 100 and the FTSE 250. UK Prime Minister David Cameron's weekend announcement that the introduction of the new Help-To-Buy mortgage support programme will be brought forward to launch in the next two weeks has seen the stocks jump.
Persimmon closed up 2.4% at 1,086 pence, leading the few winners on the blue-chip index. Similarly, Bellway, closing up 3.1% at 1,300.57p, Taylor Wimpey, closing up 3% at 99.91p, Barratt Developments, closing up 2.2% at 308.6p, and Redrow, closing up 2.6% at 233p, were amongst the biggest risers on the FTSE 250.
Consumer goods manufacturer, Unilever, warned in a trading update after the market close that its growth in emerging markets slowed during the third quarter and that it retracted its predictions, expecting underlying sales growth of 3% to 3.5%, driven by a weakening of emerging market currencies. The company reported underlying sales growth of 5% in the first-half, with emerging markets up 10.3%.
Travelzest, closing up 94% at 1.34p, was by far the biggest gainers on the AIM All-Share index. The travel company, which is completely reliant on bank funding to keep trading, announced that lender Elleway Acquisitions Ltd had agreed to extend its on-demand working capital facility for another week. This gives the company until October 7 to try and find a longer-term solution to its debt crises.
Tuesday's data calendar sees Japanese unemployment rate figures and manufacturing data overnight. Italian unemployment data is out at 0900 BST, with EU unemployment at 1000 BST. US Redbook index figures are set to be released at 1355 BST.
There is a raft of Markit manufacturing data scheduled to be released throughout the day. Italian figures are scheduled for 0843 BST, with French data at 0848 BST, Germany's at 0853 BST, UK's equivalent at 0928 BST, before finally US figures are released at 1358 BST.
China celebrates National Day for the rest of this week.
By James Kemp; [email protected]
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