17th Oct 2013 12:26
LONDON (Alliance News) - UK stocks are trading flat Thursday as investors exhibit a muted reaction to a temporary solution to the US debt ceiling crisis.
Despite US lawmakers reaching a compromised deal after the London close Wednesday, investors remain uneasy about the terms of the agreement. The deal will fund the government until January 15 and extend the debt ceiling until February 7. Matt Basi, a senior sales trader at CMC markets comments that the agreement has simply bought a little more time, serving as a temporary pain relief, before we have to endure it all again in a few months time.
Ahead of the Wall Street bell, the FTSE 100 is down 0.2% at 6,555.73, the FTSE 250 is down 0.1% at 15,200.35, while the AIM All-Share index is up 0.1% at 791.64.
In the aftermath of the debt crisis, China's Dagong Global Credit Rating has downgraded its ratings for US local and foreign currency credit from "A" to "A-", maintaining a negative outlook. "The government is still approaching the verge of default crisis, a situation that cannot be substantially alleviated in the foreseeable future," it added.
The downgrade has been beneficial for traditional safe-havens.
The Swiss franc has climbed against major currencies in European deals on Thursday, currently trading at USD1.1065, EUR0.8103, GBP0.6873, and JPY108.314.
Similarly, the price of gold has soared. Ahead of the US market open, the yellow metal is up 2.8% at USD1316.80 per ounce.
At the same time, the dollar, seen as a safe haven in normal circumstances, has weakened. The euro is currently trading at USD1.3656, having hit an eight-month high in early trading. The pound is trading at USD1.6109.
At the individual UK stock level, Renishaw has seen its share price slip 7.7%. The engineering company is biggest faller on the FTSE 250 after it said that revenue for the three months to September 30 had fallen to GBP79.0 million from GBP95.9 million in the same period last year as the business continues to trade in challenging conditions. Despite growth of 18% in the Americans and 6% in Europe, a 40% reduction in revenue in Renishaw's largest region - the Far East - offset these gains. Pretax profit for the first quarter amounted to GBP10.6 million, compared with GBP27.7 million last year.
Ahead of the release of US initial and continuing jobless figures for the week ending October 11, the futures markets indicate a mixed open. The S&P is called to open down 0.1%, the DJIA is called to open down 0.3%, while the Nasdaq is called to open flat.
US initial jobless claims figures for the week ending October 11 are expected to hit 335,000, according to FXStreet.com, while continuing jobless claims are forecast to increase to 2.94 million from 2.91 million.
The Philadelphia Fed manufacturing survey is scheduled for 1500 BST.
By James Kemp; [email protected]; @jamespkemp
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