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Anxious markets little moved as US debt clock ticks
by Chris Marshall on Oct 14, 2013 at 09:20
US politicians’ failure to see off the growing risk of a default for the world’s largest economy ensured a fragile start to trading on Monday morning, with weak economic news from China also weighing on sentiment.
There was no breakthrough from Democrat and Republican leaders in the Senate as warnings mounted up about the damage a US debt default – if US politicians fail to agree a deal by Thursday – could wreak on the global economy. Christine Lagarde, International Monetary Fund chief, said that the world economy could fall into recession if the deadlock is not broken.
Having rallied at the end of last week on hopes the debt impasse would be resolved at least temporarily, Britain’s FTSE 100 was trading flat at 6,490. Europe’s Stoxx 50 was also flat, at 2,778.
The absence of a sharp market fall however suggests markets are still expecting a last minute deal to prevent a default.
Adding to investor caution were surprisingly weak trade statistics from China, showing that exports fell 0.3% year on year in September, down from 7.2% in August. Inflation meanwhile rose to 3.1% in September, up from 2.6% in August and higher than expected.
Some economists put the weak China trade figures down to seasonal effects, while adding that the monthly figures are often volatile. But economist at Nomura had a more pessimistic take: ‘These data support our view that growth peaked in Q3 and will resume a downward trend upon the withdrawal of policy supports,’ they said.
Of London companies, Royal Mail (RMG.L) shares, which start full trading tomorrow, continued to shift higher, up 2.8% at 468p
Johnson Matthey (JMAT.L) rose 4.5% to £29.48 after analysts at JP Morgan upgraded the chemical company’s shares to ‘overweight’, pointing to ‘years of investment in the industrial catalyst market to lead to accelerated growth, benefitting from the swathe of new customer capex driven by Chinese petrochemical self-sustainability and the US shale gas revolution’.
A disappointing financial update from Michael Page (MPI.L), the recruitment firm, sent shares down sharply, off 6.3% to 462p. The company reported that gross profits fell 0.2% to £127 million in its third quarter, lower than expected by the City. The firm said the fourth quarter would be ‘challenging’ and it also announced the appointment of Kelvin Stagg as acting finance director, following the resignation of Andrew Bracey.
RBS (RBS.L) was the biggest faller on the FTSE 100, down 2.2% to 368p
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