Heavy falls from Carnival, Tesco and utility stocks weighed on the FTSE 100 on Wednesday while uncertainty over the US budget and Federal Reserve monetary policy continued to dampen sentiment.
London's benchmark index finished 19.93 points lower at 6,551.53, a fall of 0.3% on the day. This was the lowest close for the Footsie since September 9th when it ended the day at 6,530.74.
Recent mixed economic data and conflicting comments by Fed officials over recent days continue to muddy the outlook for the central bank's stimulus programme. Falling consumer confidence figures yesterday were met with a continuing improvement in the housing market today as US new home sales jumped by a better-than-expected 7.9% in August.
Meanwhile, the ongoing debate over the US debt ceiling continues to grab the market's attention after Treasury Secretary Jacob Lew said that investor confidence in an eventual deal to raise the limit is probably "greater than it should be". He said: "People have to take seriously that Congress has a lot of work to do in a short period of time."
According to Moody's, a failure by Congress to agree to lift the debt limit would have a worse outcome for financial markets than a government shutdown. The ratings agency said in a report that worries over a default "could roil financial markets and damage business and consumer confidence".
FTSE 100: Carnival extends losses after Q3 disappointment
Cruise operator Carnival was a heavy faller for a second day in a row after the company disappointed with its third-quarter results and guidance for the full year. Morgan Stanley downgraded its rating on the stock today from 'equalweight' to 'underweight' and cut its full-year earnings per share estimates by 28%, raising concerns about falling revenue yields and rising costs.
Supermarket group Tesco was hit by a downgrade by JPMorgan Cazenove from 'neutral' to 'underweight' after the bank said that the company will be the most affected by structural problems in the UK food retailing industry given the rising price/range competition from Aldi and Lidl. Rival supermarkets Morrison and Sainsbury were also lower today.
British Gas owner Centrica was registering firm losses after going ex-dividend, meaning that from today investors won't have access to its latest payout. However, the stock was also being weighed down by Labour's plans to freeze gas and electricity bills if it returns to power in 2015. Sector peer SSE was also falling heavily.
Financial peers RSA Insurance and Old Mutual were on the decline after going ex-dividend.
Leading on the upside were banking stocks with RBS, Barclays and Lloyds , along with insurance groups Aviva and Admiral.
Aerospace and defence group BAE Systems was also making gains on hopes over a United Arab Emirates contract for up to 60 Typhoon fighter jets. Meanwhile, yesterday's news that South Korea re-opened a tender for a fleet upgrade also helped sentiment.
FTSE 250: Workspace climbs on planning permission news
Workspace Group, the business premises provider, was rising high on the news it has secured planning permission to redevelop its Canary Wharf business park.
Insurance and reinsurance firm Amlin was also in demand after UBS raised the stock from 'neutral' to 'buy', saying that the share price's recent underperformance has been overdone.
Drax, Premier Farnell, Kentz, Oxford Instruments, Playtech, Redrow and Bovis Homes were all trading lower after going ex-dividend today.
FTSE 100 - Risers
Fresnillo (FRES) 1,006.00p +3.60%
Travis Perkins (TPK) 1,661.00p +2.34%
BAE Systems (BA.) 461.30p +2.31%
International Consolidated Airlines Group SA (CDI) (IAG) 340.50p +2.25%
Anglo American (AAL) 1,577.50p +2.07%
Vodafone Group (VOD) 217.20p +1.92%
Aviva (AV.) 409.40p +1.41%
Admiral Group (ADM) 1,229.00p +1.32%
Royal Bank of Scotland Group (RBS) 372.70p +1.30%
Randgold Resources Ltd. (RRS) 4,550.00p +1.27%
FTSE 100 - Fallers
Carnival (CCL) 2,106.00p -6.73%
SSE (SSE) 1,489.00p -5.76%
Centrica (CNA) 375.60p -5.32%
Tesco (TSCO) 360.90p -3.50%
Sage Group (SGE) 335.50p -3.34%
Aberdeen Asset Management (ADN) 385.30p -2.01%
RSA Insurance Group (RSA) 122.60p -1.92%
Whitbread (WTB) 2,937.00p -1.84%
Old Mutual (OML) 190.50p -1.70%
Marks & Spencer Group (MKS) 495.30p -1.63%
FTSE 250 - Risers
Greencore Group (GNC) 147.20p +5.14%
Workspace Group (WKP) 433.40p +4.51%
Amlin (AML) 415.50p +3.62%
Ocado Group (OCDO) 393.80p +3.36%
Dunelm Group (DNLM) 975.50p +2.47%
Daejan Holdings (DJAN) 3,799.00p +2.37%
Cairn Energy (CNE) 265.20p +2.24%
Partnership Assurance Group (PA.) 415.00p +2.22%
Centamin (DI) (CEY) 45.55p +2.06%
Hays (HAS) 115.00p +1.95%
FTSE 250 - Fallers
Computacenter (CCC) 520.00p -3.35%
Telecom Plus (TEP) 1,262.00p -3.29%
Barr (A.G.) (BAG) 529.00p -2.31%
Close Brothers Group (CBG) 1,162.00p -2.27%
Polymetal International (POLY) 662.00p -2.22%
Fenner (FENR) 398.00p -2.21%
Dairy Crest Group (DCG) 461.50p -2.18%
Betfair Group (BET) 1,046.00p -2.15%
Ashmore Group (ASHM) 387.90p -1.97%
Afren (AFR) 140.00p -1.96%