Markets spooked by US debt row and UK inflation

GLOBAL stock markets sank into the red amid fears over the looming US debt ceiling deadline and the prospect of higher interest rates in the UK.

On a bleak day for investors, the FTSE 100 fell 1.8pc, or 135.85 points, to 7627.1 and the FTSE 250 dropped 1.4pc, or 277.15 points, to 18931.16.

In Europe, the main benchmark in Germany slid 1.9pc and France’s Cac 40 dipped 1.7pc.

On Wall Street, the S&P 500 shed 0.9pc, the Dow Jones Industrial Average sank 0.9pc and the technology-heavy Nasdaq lost 1.1pc.

The slump came as another round of talks on extending the US debt ceiling – the limit on how much money the US government can borrow – ended without a deal. This self- imposed limit stands at £25 trillion.

President Biden and House Speaker, Republican Kevin McCarthy, have been locked in negotiations to try to find a deal on lifting the debt ceiling that can be passed through the US Congress. If there is no agreement before the June 1 deadline, the US will not have enough money to pay its employees and interest on its debt, plunging the country into default.

Economist Nouriel Roubini, nicknamed Dr Doom after he predicted the 2008 sub-prime mortgage crisis, said talks could drag on with potentially disastrous consequences.

‘They may get to the last hour before an agreement,’ he told Bloomberg TV. ‘Or it’s possible they don’t reach an agreement. If that doesn’t happen, then the market is going to crash.’

Fears over the outlook for the UK were fuelled by higher-thanexpected inflation. With investors and analysts betting on further interest rate rises – and, in turn, mortgage costs – housebuilders were on the rocks.

Persimmon slumped 5.5pc, or 71p, to 1215p, Taylor Wimpey fell 4.5pc, or 5.6p, to 117.5p, Barratt Developments shed 3.6pc, or 17.6p, to 477.3p and Berkeley Group slid 4.3pc, or 180p, to 4025p.

Among the mid-cap housebuilders, Crest Nicholson dipped 3.9pc, or 10p, to 247.4p.

Redrow retreated 5.3pc, or 27.7p, to 497.8p, Vistry Group lost 4.9pc, or 38.5p, to 751.5p and Bellway sank 4pc, or 98p, to 2328p.

Utility stocks were also in the red despite largely positive updates. SSE will look to invest up to £40bn this decade on clean energy projects. The pledges came as the Scottish energy firm nearly doubled its profit to £2.2bn in the year to the end of March. Shares slumped 1.6pc, or 30.5p, to 1900p.

Severn T rent brushed aside extreme weather and soaring energy prices to report higher revenues while profits were broadly flat in the 12 months to March 31. Shares fell 1.9pc, or 52p, to 2745p.

Intertek found itself among only a handful of blue-chip risers.

The quality assurance and product testing firm’s revenue of £1.05bn between January and April was 6.5pc higher than the same period a year earlier.

The lifting of Covid-19 restrictions at the start of 2023 helped to improve the performance of its Chinese business, which it said will be a ‘significant contributor to the group’s performance in 2023’. As such, Intertek reiterated its forecasts for group revenue to grow by at least 5pc this year. Shares gained 3.4pc, or 141p, to 4333p.

Great Portland Estates, which owns offices and retail sites in the West End and City of London, swung to a loss following a decline in the value of its property portfolio. It made a £164m loss for the year to the end of March, having reported a profit of £166.7m in the same period 12 months earlier.

The value of the group’s property portfolio fell 6.6pc to £2.38bn over the 12 months. Shares fell 2.1pc, or 11p, to 503.5p.