Fears of US spending curbs from debt ceiling deal cow investors
FEARS over the impact of spending limits under a US debt ceiling deal today meant no uplift for European markets as the run of lacklustre trading continued.
The Biden-McCarthy compromise at the weekend suspends the debt ceiling until January 2025, with federal spending capped over the next two years.
The agreement now has to clear Congress before June 5, which is the latest date that Treasury Secretary Janet Yellen has said that the US can pay its bills.
But traders are worried about more political wrangling and the prospect of spending restrictions at a time when the Federal Reserve is still tightening monetary policy.
The FTSE 100 index slipped 8.38 points to 7618.82, reflecting the earnings exposure of blue-chip companies in the US.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: ‘’A deal may have been struck on the debt ceiling, but it’s not fully calmed nervousness on financial markets.
“Limits on spending are being imposed just as America looks set to head towards recession, which could make it harder for growth to snap back,” she said.
Blue-chip fallers included Entain, whose operations include its US-based BetMGM joint venture as well as Ladbrokes and FoxyBingo in the UK. The shares fell 20p to 1382p, while rival Flutter Entertainment lost 160p to 15,925p.
Outsourcing firm Bunzl also lost 29p to 3165p despite a landmark session in which bolt-on deals in Spain and Brazil took its number of acquisitions since 2004 to 200.
The UK-focused FTSE 250 index outperformed the top flight with a rise of 0.5% or 96.64 points to 18,890.73, led by RHI Magnesita after a subsidiary of private equity firm Rhone Capital announced a surprise move to buy a 20% stake.
Shares in the supplier of high-grade refractory products jumped 468p to 2518p, with the offer at 2850p being a 39% premium to Friday’s closing price.
Hunting, the oil well services firm, also surged 17% or 33.5p to 235p after lifting full-year earnings guidance on the back of a major contract worth $91 million in India.