Continuing US shutdown shakes markets

POLITICAL gridlock in Washington left European markets in the red amid disappointment over the lack of progress in resolving America’s budget crisis.

The FTSE 100 Index was down by over 50 points during the session but it recovered ground to close 16.6 points off at 6437.3.

Following a poor run in Asian stock exchanges overnight, markets in France and Germany also dipped. On Wall Street, the Dow Jones Industrial Average was in negative territory as well.

The falls come as the impasse on Capitol Hill shows no signs of resolution, after the US was last week forced to limit government operations when Congress failed to approve short-term funding to allow the nation to pay its bills.

A potentially more worrying stalemate looms over raising the

MARKS AND SPENCER

administration’s debt ceiling or borrowing limit, with a deadline of October 17.

In the latest blow, Republican speaker John Boehner has ruled out a vote on raising the ceiling without the need for concessions from President Barack Obama.

The crisis helped sterling make gains against the dollar, rising one cent to 1.61 US dollars, while it was flat against the euro at 1.19 euros. Among stocks on the bluechip risers board, gained after it announced an order from Japan Airlines to buy 31 Airbus A350 aircraft, which are powered by its Trent engines.

Rolls shares rose 4p to 1119p as the order represented a shift in Japanese aviation as carriers traditionally favour Airbus rival Boeing. The order is also good news for Rolls staff at Derby, where the company employs around 11,000 people.

Retailer was one of the biggest fallers in the top flight after Credit Suisse scaled back its full-year forecasts after the second quarter of the financial year had been slower than expected in clothing.

It believes general merchandise margins will have come under pressure due to higher markdowns over the summer and 4019 3341 403 1191 2045 1501 9311 4225 628 4283 1115 1096 6741 971 2275 2881 121 1260 784 4801 +123 +91 +1 +27 +47 +3 +18 +73 +111 +73 -61 -50 -301 -42 -87 -107 -4 -37 -23 -133 +3.16 +2.92 +2.59 +2.49 +2.35 +2.03 +1.97 +1.88 +1.87 +1.85 -5.19 -4.36 -4.33 -4.15 -3.76 -3.64 -3.20 -2.85 -2.85 -2.77 an earlier mid-season sale. M&S shares have enjoyed a strong run in recent weeks but fell back nearly 3% or 13.7p to 480.3p.

Other stocks from the retail sector were also under pressure,

with

674.5p. down 60p at 5030p and

30.5p cheaper at

which supplies bacon and sausages to supermarkets including Tesco and Sainsbury’s, has been hit by record pig prices, which have offset strong turnover growth in the fresh pork and bacon categories.

cut its forecast for full-year operating profits by 6% to £50million but said it maintained its forecast for the following year.

The biggest FTSE 100 risers were up 18p to 931.5p,

up 7.8p to 422.6p, up 3.3p to 181.8p and up 26p to 1468p.

The biggest FTSE 100 fallers were down 30.5p to 674.5p, down 37p to 1260p, down 13.7p to

down 480.3p and 45p to 1640p. USstocks fell yesterday, extending two weeks of losses, as a lack of progress in ending the partial US Government shutdown and the debt-ceiling standoff kept investors nervous.

The S&P 500 ended near its lows of the session in a volatile day and dropped for its 10th time in the past 13 sessions.

The CBOE Volatility index, a measure of investor anxiety, jumped 16% to its highest level since June. The VIX has gained for three weeks, up 48% over that period. Much of the Government has been closed since the start of the month, resulting in up to one million workers being furloughed.

Investors are also looking ahead to the upcoming debate over the debt ceiling, which could result in a default on US debt if not resolved. In weekend comments, neither Republicans nor Democrats offered any sign of progress and both blamed the other side for the impasse. The deadline to increase the ceiling is October 17.

“The market is vulnerable to further declines for as long as the situation remains unclear. With each passing day, the market becomes more restless,” said Leo Grohowski, chief investment officer at BNY Mellon Wealth Management in New York.

Mr Grohowski, who helps oversee $175 billion in client assets, estimated that each week the shutdown continues could shave 10 to 15 basis points off gross domestic product.

“While that isn’t a lot, the recovery is still too fragile to withstand any long-term impact. It will start to have an impact on earnings estimates, which will impact valuations,” he said.