The ongoing debt-ceiling debate saw the Footsie slip moderately lower on Wednesday, with the nomination of arch-dove Janet Yellen to the Chair of the US Federal Reserve doing little to assuage market worries.
London's benchmark FTSE 100 index ended Wednesday's session at 6,337.91, a level not seen since July 3rd when it closed at 6,229.87.
From a technical point of view the top-flight index today probed the bottom part of a downwards-sloping price channel. Nevertheless, trading volumes were light and it had still to move convincingly below its 200-day moving average, although downside risks remained - and could intensify - so long as the debt stand-off continues.
Alastair McCaig, Market Analyst at IG, said of the price action: "Confidence that the US will get its act together is slowly turning into fear, and the chances of the FTSE seeing a 6,200 handle in the coming days are increasingly likely."
In its Global Financial Stability report, released on Wednesday afternoon, the International Monetary Fund (IMF) said that the primary challenge for policymakers was to manage the current side effects and the eventual withdrawal of easy money policies such as low interest rates and bond buying by the US central bank - the Federal Reserve.
Spain´s Ibex 35 outperformed the rest of the Continent after the country´s Treasury managed to get off a €4bn issue of 31-year bonds. The sindicated sale saw strong demand from overseas investors, who took almost two-thirds of the same.
Ahead on Wednesday evening lay the release of the minutes of the US Federal Open Market Commitee´s (FOMC) last meeting. They were expected to shed further light on the Fed's shock decision to maintain its $85bn per month in bond purchases until seeing further signs of economic recovery.
UK data fails to impress
Domestic economic data provided some downwards pressure on markets after industrial production unexpectedly declined by 1.1% in August, its biggest fall since September 2012. This was worse than the revised 0.1% expansion in July and well below than the 0.4% increase expected.
Manufacturing production meanwhile slipped by 1.2%, missing the consensus forecast for 0.4% growth.
"August's weak industrial production and trade figures signal that gross domestic product (GDP) growth in the third quarter might not be quite as strong as the business surveys have suggested," said UK Economic Samuel Tombs from Capital Economics.
Nevertheless, he pointed out that these falls do not reverse all of the rise in production seen in the previous two months. "Indeed, industrial production is still on track to make a small positive contribution to GDP growth in third quarter."
ONS also cautioned not to read too much into the dip, given similar falls in August of 2012 and 2011.
Today´s August non-EU trade figures raised concerns at Barclays Research about the competitiveness of UK exports and their ability to penetrate new markets.
Impasse continues Stateside
There were some, albeit small, developments on the debate over the debt ceiling overnight after President Barack Obama said he was open to a short-term deal to raise the debt ceiling and reopen the government but only if it is not attached to conditions.
He said he was willing to hold budget talks with the Republicans as long as they lift "threats" against the economy and stop demanding concessions in policy in exchange for a deal. "[They] don't get to demand ransom in exchange for doing their jobs," the President said.
According to reports, Senate Democrats were planning a test vote in the coming days over whether to give Obama to authority to raise the debt ceiling in the short term.
However, House Speaker John Boehner remained defiant, saying that an immediate increase in the debt ceiling without conditions was "unconditional surrender". He said: "There's going to be a negotiation here [...] It's time to have that conversation."
FTSE 100: Vedanta slumps despite strong Q2
Vedanta Resources delivered record oil and gas production and a rise in the output of refined zinc, lead and silver in the second quarter. However, the stock was among the worst performers this morning after reportedly being downgraded by Morgan Stanley to 'underweight'.
Precious metals mining group Fresnillo also fell despite announcing that the temporary suspension of Minera Penmont's explosives permit at Noche Buena has been lifted and operations have restarted. Falling gold and silver prices this morning are likely to have weighed on the stock, with sector peer Randgold also trading in the red.
A number of blue-chip stocks were also falling after going ex-dividend today, including Aviva, Smith & Nephew, Tesco, Travis Perkins, Wolseley and WPP.
Housebuilding stocks performed well after upbeat comments from Goldman Sachs over the outlook for the market, driven in part by the government's mortgage guarantee scheme, 'Help to Buy'. The bank said that the scheme, along with recent economic data, indicates a "rebound in activity". Persimmon was a high riser on the FTSE 100, bouncing from technical support at its 200-day moving average.
Financials were also doing their best to support the index with Standard Chartered, Lloyds, Aberdeen Asset Management and Barclays making gains.
FTSE 250: N Brown falls after first-half results
Online and catalogue retailer N Brown fell after reporting an 8% rise in revenue and 5.9% increase in operating profits in the first half. Adjusted earnings per share however were broadly flat, up just 0.6% at 12.55p.
Pubs owner and ale brewer Marston's was among the best performers after saying that trading in the second half-year has been encouraging, with the heatwave over the summer offsetting poor weather during the first half-year. Numis today upgraded the shares
UK bakery chain Greggs advanced after seeing the rate of like-for-like sales decline ease in the third quarter, while total sales growth was helped by the opening of new shops.
Housebuilders Barratt Developments and Bovis Homes were sharply higher after Goldman upgraded both stocks to 'buy'. Sector peer Taylor Wimpey meanwhile was labelled as a 'conviction buy'.
FTSE 100 - Risers
Persimmon (PSN) 1,131.00p +5.01%
William Hill (WMH) 402.50p +1.39%
InterContinental Hotels Group (IHG) 1,785.00p +1.25%
SSE (SSE) 1,454.00p +1.11%
National Grid (NG.) 743.50p +1.09%
Aberdeen Asset Management (ADN) 372.90p +1.08%
Smith & Nephew (SN.) 755.50p +1.07%
Marks & Spencer Group (MKS) 468.70p +1.06%
Kingfisher (KGF) 364.80p +1.00%
Pearson (PSON) 1,254.00p +0.89%
FTSE 100 - Fallers
Vedanta Resources (VED) 1,020.00p -4.67%
ARM Holdings (ARM) 945.50p -3.27%
Randgold Resources Ltd. (RRS) 4,295.00p -2.83%
ITV (ITV) 178.90p -2.56%
Sage Group (SGE) 312.90p -2.40%
Capita (CPI) 967.50p -2.32%
Standard Life (SL.) 333.20p -2.32%
Legal & General Group (LGEN) 186.50p -2.20%
Reed Elsevier (REL) 821.50p -2.09%
Burberry Group (BRBY) 1,550.00p -2.08%
FTSE 250 - Risers
Ladbrokes (LAD) 179.80p +6.39%
Taylor Wimpey (TW.) 103.80p +5.17%
St. Modwen Properties (SMP) 328.90p +4.85%
Crest Nicholson Holdings (CRST) 343.50p +4.15%
Bellway (BWY) 1,320.00p +3.94%
Carpetright (CPR) 652.00p +3.66%
Barratt Developments (BDEV) 320.00p +3.59%
Fisher (James) & Sons (FSJ) 1,132.00p +3.57%
Computacenter (CCC) 525.50p +2.84%
Redrow (RDW) 235.80p +2.83%
FTSE 250 - Fallers
Ted Baker (TED) 1,660.00p -5.41%
Imagination Technologies Group (IMG) 262.10p -5.21%
Brown (N.) Group (BWNG) 489.00p -5.14%
Supergroup (SGP) 1,069.00p -3.95%
Dechra Pharmaceuticals (DPH) 687.50p -3.85%
Genus (GNS) 1,321.00p -3.65%
Kazakhmys (KAZ) 246.00p -3.60%
Euromoney Institutional Investor (ERM) 1,046.00p -3.59%
Halma (HLMA) 528.00p -3.39%
Balfour Beatty (BBY) 264.00p -3.23%
FTSE TechMARK - Risers
Ark Therapeutics Group (AKT) 0.37p +15.62%
Antisoma (ASM) 1.53p +10.87%
XP Power Ltd. (DI) (XPP) 1,402.00p +2.94%
Kofax (KFX) 366.50p +1.81%
RM (RM.) 112.00p +1.70%
Torotrak (TRK) 27.00p +0.93%
E2V Technologies (E2V) 142.75p +0.88%
Wolfson Microelectronics (WLF) 153.25p +0.82%
Vislink (VLK) 44.00p +0.57%
FTSE TechMARK - Fallers
Electronic Data Processing (EDP) 67.00p -4.29%
SDL (SDL) 286.00p -2.05%
Sepura (SEPU) 140.75p -1.92%
Skyepharma (SKP) 88.50p -1.67%
BATM Advanced Communications Ltd. (BVC) 16.25p -1.52%
Phoenix IT Group (PNX) 153.00p -1.45%
Anite (AIE) 109.50p -1.35%
Promethean World (PRW) 17.12p -0.72%
Vectura Group (VEC) 110.00p -0.68%
Oxford Biomedica (OXB) 2.30p -0.43%