17th Oct 2013 06:44
LONDON (Alliance News) - UK stocks are expected to open lower Thursday, a day after the US Congress rushed through an eleventh-hour agreement to temporarily lift the government's debt limit, avoid default, and reopen the government.
The short-term compromise deal, which will fund the government until January 15 and extend the debt ceiling until February 7, came just hours before the US Treasury's Thursday deadline, when it forecast that it would run out of money to pay the government's bill's.
In a 285-144 bipartisan vote, 87 Republicans joined Democrats in passing the bill, giving up on their earlier insistence that Democrats had to dismantle US President Barack Obama's health insurance reform in exchange for their support for a short-term budget deal and the lifting of the debt ceiling. However, Senate Republican leader Mitch McConnell said the party was still determined to oppose Obamacare.
Obama signed the bill into law without comment.
World Bank President Jim Young Kim said, "the global economy dodged a potential catastrophe," adding, "this is good news for developing countries and the world's poor." Similarly, Christine Lagarde, managing director of the International Monetary Fund, greeted the temporary resolution as an "important and necessary step". Lagarde, however, cautioned that it was fundamentally important that the US reduced uncertainty in its conduct of fiscal policy.
Whilst the Asian stock markets are posting modest gains, both CMC Markets and IG are calling the FTSE 100 to open down Thursday, around the 6,555 mark. UK shares rallied on Wednesday ahead of the US announcement, so have largely priced in the budget agreement already.
Michael Hewson, senior market analyst at CMC Markets, commented that the US debt crisis was, "much ado about nothing", adding: "Europe's markets may well see a slight hangover, opening lower after their late surge." Investors are likely to remain wary of the temporary solution, Hewson said, as despite averting a default in the short-term, "we have to go through this entire circus again in the New Year."
There has been a raft of UK corporate releases prior to the open Thursday. Quarterly results from BSkyB, and trading statements from Travis Perkins, Diageo, SABmiller, and Man Group, are likely to influence in London share trading Thursday morning.
In the data calendar, UK retail sales data is expected at 0930 BST. US building permits, housing starts, and jobless claims are released at 1330 BST. The Philadelphia Fed manufacturing survey is scheduled for 1500 BST.
By James Kemp; [email protected]; @jamespkemp
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