14th Oct 2013 12:00
LONDON (Alliance News) - Markets are subdued Monday as the US enters the Columbus Day holiday with little sign of substantial progress on a debt deal, just three days before the current borrowing limit expires.
The two top Senate leaders talked over the weekend, but the White House stood its ground, issuing a statement saying US President Barack Obama continued to insist on clean passage of a short-term budget and clean lifting of the borrowing limit - without Republican strings attached - before he would negotiate with them.
Tension rose in the capital over the weekend after military veterans and activists tore down barricades at the World War II memorial and carried them to the White House to protest the shutdown of national monuments and parks. Hardline Republican lawmakers like Senator Ted Cruz and former Alaska governor Sarah Palin spoke at the protest, charging that Obama had ordered the shutdown of popular sites to increase the pain.
If no solution is found by Thursday - at least on raising the current 16.7-trillion-dollar borrowing limit - the US faces default on its obligations for the first time in history, a prospect that has rattled financial markets around the world. If a raise cannot be agreed on, the US will be unable to pay the interest on its debt held by foreign investors, or payments to senior citizens and other recipients in line for mandatory government support.
“Problems arise if the debt ceiling is not increased in the long-term, which could start to have a detrimental impact on the economy, which in turn could threaten the US’s ability to raise enough revenue to pay off its interest and principle payments. Thus, even if hitting the debt ceiling in the next few days is not quite the calamity some expect, it still leaves the US in a precarious position... A temporary extension is positive in the near-term as it would make a default event and thus a downgrade less likely, however it would only kick the can down the road and it would still leave the prospect of a US credit downgrade a real possibility,” said Kathleen Brooks, research director UK EMEA at FOREX.com
In the UK, The Ernst and Young Item Club predicted there will be rapid improvement in the housing market, but fears of a housing market bubble are misplaced. The think tank raised its 2013 UK growth forecast to 1.4% from 1.1% previously, citing the improving outlook for the housing market and consumer confidence, and lifted its projection for 2014 to 2.4% from 2.2%.
That came after António Horta-Osório, chief executive of Lloyds and one of the most enthusiastic supporters of the government’s Help to Buy mortgage initiative to make home ownership more affordable, told the Financial Times in an interview that the policy could only succeed if accompanied by broader reform. The scheme risks creating a dangerous bubble in property prices unless steps are taken to free up planning restrictions and boost the supply of new housing, he told the FT.
There was good news for the UK construction sector after Carillion was selected to develop the GBP800 million Airport City project at Manchester Airport as part of a consortium also including Beijing Construction Engineering Group and the Greater Manchester Pension Fund. Rival Balfour Beatty, meanwhile, won a deal with the North Carolina Department of Transportation in the US to construct the I-140 Wilmington Bypass highway project, worth GBP77 million.
Angela Merkel has commenced a second round of exploratory talks with main opposition, the Social Democrats, as she nears a decision on who will become her coalition partner as she forms the new German government.
Ireland has announced it would exit its international bailout programme before the end of the year, becoming the first eurozone country to do so. The country is set to make cuts and tax hikes worth EUR2.5 billion euros in 2014 as part of what the government says will be the last of the "really tough" austerity budgets. The country has endured successive harsh budgets since it received a bailout from the International Monetary Fund, the European Commission and European Central Bank to address its banking and fiscal crises in November 2011. The budget Finance Minister Michael Noonan is due to present Tuesday is EUR600 million less than originally projected. Last week, he revealed that with the "resurgence" in the economy and "significant savings" the severity of the budget could be reduced.
The United Nations has reported "good progress" in verifying information by the Syrian government about the country's chemical arsenal after its first 10 days of ground operations. A joint team from the UN and the Organisation for the Prohibition of Chemical Weapons (OPCW) – which won the 2013 Nobel Peace Prize last week - began destroying arms and production facilities under a US-Russian plan backed by a UN Security resolution to rid Syria of its chemical weapons stockpile.
--------
FTSE 100: Up 0.2% At 6,497
FTSE 250: Up 0.3% At 15,017.77
AIM ALL-SHARE: Flat At 786.19
GBP-USD: 1.5985
EUR-USD: 1.3559
GOLD: USD1283.00 an ounce
OIL (Brent): USD110.50 a barrel
--------
KEY UK CORPORATE NEWS:
FTSE 100: Vodafone Group said its offer for Kabel Deutschland Holding has completed, leaving it with a 76.57% stake as transfer discussions between the firms begin. Shares in Johnson Matthey are up after the specialty chemical company was upgraded by JPMorgan Cazenove to Overweight from Neutral, while Croda International is the biggest faller on the 100 after the broker cuts its recommendation to Neutral from Overweight.
FTSE 250: Essentra is one of the biggest gainers on the index after reporting higher third-quarter revenue driven by growth in most of its divisions and a number of acquisitions. IP Group is up as portfolio company Applied Graphene Minerals – which it has a 25% stake in - says it intends to raise funds by floating on AIM. Cable & Wireless Communications is also a riser after subsidiary Monaco Telecom SAM sells its Algerian satellite communication business Divona SpA to Smart Link Com SpA in a USD1.4 million deal. WS Atkins got a new, enlarged five year GBP200 million revolving credit facility with lenders including Bank of America Securities, Barclays Bank, HSBC Bank and The Royal Bank of Scotland. Michael Page International is the biggest faller on the index after warning that the fourth quarter would be tough and its chief financial officer has resigned. It posted a slight rise in third-quarter gross profit. Kentz Corp has been awarded a contract with Qatar Shell GTL Limited for engineering, procurement and construction services at Shell's Pearl Gas-to-Liquids plant in Ras Laffan, Qatar. No financial details were provided.
AIM: Totally is one of the morning's biggest risers after it won a contract with Southern Derbyshire Clinical Commissioning Group and the Royal Derby Hospital NHS Foundation Trust to work with patients diagnosed with chronic obstructive pulmonary disease. Urals Energy climbs 20% on the back of the company saying it had got an offer of 12.25 pence a share from what it described as a "highly credible purchaser with previous Russian operational oil experience." The move comes less than three weeks after its biggest shareholders, Alpcot Capital Management and Fire East Corporation, launched an attempt to oust all but one of Urals Energy’s board. Urals Energy said it had called an extraordinary general meeting to vote on the request to oust its board. It has called on shareholders to reject all the motions by the two holders who called the meeting, warning that it was at risk of a default if one board member is removed. Oilex rises after being awarded two new oil exploration permits for areas in the Canning Basin, Australia, giving it a bigger overall exploration area. Travelzest is up after its lender gave it a further further extension to its on-demand working capital facility until October 21. Tristel is up despite lowering its final dividend as it posted decreased revenues and widened pretax losses. The specialist hygiene products and contamination control company said its performance improved in the second half due to cost cutting measures and growth in Tristel's newer products such as its non- and single-lumen instrument disinfectant products and it is cautiously optimistic for the coming year. Shares in Boxhill Technologies, previously The Weather Lottery, are down after its name change and despite its subsidiary, Pay Corporation, signing a contract with software and services company Bright Office. Sacoil Holdings is another big faller after it restarted trading on AIM, having said Friday that it was in talks to restructure its debt and securing new loans. The company Friday said is in discussions with Energy Equity Resources Ltd to agree a repayment schedule for a loan it received, and it plans to convert its Gairloch Ltd debt to equity and to recapitalise the company "within a reasonable period of time." It said it remains confident that it will have the funds necessary to continue to trade as a going concern up to the receipt of funds from a proposed rights offer.
--------
AFTERNOON WATCHLIST: Japan Health-Sports Day, US Columbus Day
--------
Tuesday's Key UK Corporate Events
eV2 Techologies Interim 2014 Trading Statement
Bellway FY Preliminary Results
Telford Homes Trading Statement
Hargreaves Landsdown Interim Management Statement
Rio Tinto Q3 2013 Production Report
Burberry Q2 2014 Trading Statement
-------
Tuesday's Key Economic Events
All Day EU EcoFin Meeting
03:00:00 China FDI - Foreign Direct Investment
05:30:00 Japan Industrial Production
07:00:00 Germany Import Price Index
07:45:00 France Consumer Price Index
07:45:00 France Inflation ex-tobacco
09:30:00 UK Consumer Price Index
09:30:00 UK Producer Price Index
09:30:00 UK Retail Price Index
10:00:00 Germany ZEW Survey
13:30:00 US NY Empire State Manufacturing Index
13:55:00 US Redbook index
15:00:00 US Fed's William Dudley speech
00:15:00 US Fed's Richard Fisher's speech
By Alice Attwood; [email protected]; @AliceAtAlliance
Copyright © 2013 Alliance News Limited. All Rights Reserved.