- US government shutdown enters day four
- US jobs report cancelled
- Italy's Berlusconi faces expulsion
FTSE 100: -0.24%
CAC 40: 0.15%
FTSE MIB: 0.41%
IBEX 35: -0.12%
Stoxx 600: -0.25%
European stocks were mixed as investors waited to see whether a resolution over the US federal budget could be reached before the week's out.
The US government enters its fourth day of a shutdown after failing to agree on a budget bill by Monday's deadline.
Markets are hoping that Congress will agree to raise the $16.7tn debt limit by the October 17th deadline to prevent the US government defaulting on its obligations.
The Treasury Department said a default could have a "catastrophic effect" on all aspects of the US economy and could lead to "events of the magnitude of late 2008 or worse".
"Not only might the economic consequences of default be profound, those consequences, including high interest rates, reduced investment, higher debt payments, and slow economic growth, could last for more than a generation," the Treasury said.
Markets expect no progress in negotiations on the budget and debt ceiling on Capitol Hill on Friday. However, a development may have been made after a spokesman for House Speaker, John Bohner, indicated that he is willing to be more flexible in order for the US to avoid hitting the debt ceiling and defaulting on its debt.
"The markets are becoming a little more nervous about the prospect of a US default. So far, investors have been relatively calm, with indices only grinding lower," said Craig Erlam, Market Analyst at Alpari.
"If investors saw this as a genuine threat, losses would be much greater. What we're seeing now is investors staying on the sideline, as opposed to selling aggressively, although that could be about to change."
As a result an all-important jobs report in the US has been cancelled.
Italy not out of the woods, says Moody's
Italy's Senate panel will on Friday vote on whether to expel centre-right leader Silvio Berlusconi from politics due to the tax fraud conviction.
It comes after he made a U-turn on his efforts to topple the coalition by backing Italian Prime Minister Enrico Letta in a confidence vote on Wednesday.
For the markets, the ousting of Berlusconi has become little more than a sideshow event given Wednesday's climax as Letta confirmed his hold on the current coalition government.
Barclays said dissenters in Berlusconi's own People of Freedom party (PDL) "should reduce the appetite for the political crisis of center-right political leaders".
Moody's, however, was more sceptical. While acknowledging that the outcome of the confidence vote was "the best scenario possible", the credit agency warned that the political developments over the last few weeks have highlighted the fragility of the Italian government.
Tate & Lyle's second quarter falls
Tate & Lyle's shares
fell after the sweeteners and food ingredients group said that adjusted operating profits in the second quarter were slightly below last year due to softness in the US beverage sector.
Carpetright declined after it announced the departure of Chief Executive Darren Shapland and warned falling sales meant full year profits would be 'significantly' below its previous expectations.
Serco slumped as it said it completed the sale of its UK occupational health business, a move which forms part of the group's strategy to take a more proactive management of its portfolio.