Progress on Capitol Hill pushed the UK market to its highest level in three weeks on Tuesday morning as investors showed optimism that lawmakers can strike a deal to avert a dreaded default.
The FTSE 100 in London was trading up 0.7% at around 6,560 this morning; the last time it has closed higher was on September 24th when it finished at 6,571.46.
"The dark clouds that were hanging over Washington are starting to pass as negotiations between the Democrats and Republicans improve. The fear of a US default has left some investors paralysed, but the progress that has been made could pave the way for a deal and that sentiment is driving stocks higher," said Market Analyst David Madden from IG.
There are now just two days to go before the government hits its $16.7tn borrowing limit and is unable to pay its bills, something which could cause "massive disruption" to the world economy and risk tipping it into another recession, according to International Monetary Fund Managing Director Christine Lagarde.
Senate Majority Leader Harry Reid said on Monday he was "very optimistic" that an agreement will be made ahead of the October 17th deadline following lengthy discussions with Minority leader Mitch McConnell. According to various reports, the proposal under discussion includes reopening the government to January and suspending the debt limit through to February 2014.
The White House announced that President Barack Obama had postponed a meeting with congressional leaders scheduled for yesterday afternoon "to allow leaders in the Senate time to continue making important progress towards a solution that raises the debt limit and reopens the government".
While the debt-ceiling debate will continue to drive market sentiment over the next few days, investors will be keeping a close eye on corporate results from the US, as third-quarter earnings season gets into full swing. Citigroup, Coca-Cola and Intel will release their quarterly earnings later on Tuesday, IBM will report on Wednesday, while results from Verizon Communication, Google and General Electric are expected on Thursday.
FTSE 100: Burberry sinks after boardroom shake-up
High-end luxury brand Burberry dropped this morning after the surprise exit of Chief Executive Officer (CEO) Angela Ahrendts and appointment of Chief Creative Officer Christopher Bailey. Ahrendts is to leave the company in mid-2014 and move to Apple to take up a newly created position. The news came as the company reported 14% growth in underlying sales in the first half, helped by strong demand from Chinese customers, and raised its profit guidance for the period.
Market Strategist Ishaq Siddiqi from ETX Capital said that profit-taking was the cause of this morning's heavy fall, given that the stock has risen around 30% so far this year. "Investors appear to be worried that Bailey may not be able to replicate the success of Ahrendts," he said.
Leading the upside were the miners as risk appetite returned to the market on hopes over a fiscal deal in the US. Rio Tinto led the risers after enjoying a good third quarter of production, having produced and shipped a record level of iron ore thanks to its new infrastructure in Western Australia.
Anglo American was higher despite revealing that a pending regulatory application could restrict access one of its subsidiary's Sishen mine in South Africa.
Sector peers Antofagasta, Fresnillo and BHP Billiton were also making decent gains this morning.
Hargreaves Lansdown rose after achieving record assets under administration (AuA) in the first quarter of fiscal year 2014. The financial services company reported AuA of £39.3bn in the three months to September 30th, up 7.9% from the previous quarter's £36.4bn.
Severn Trent was subdued after analysts at Societe Generale downgraded their ratings for the utility group to 'sell'.
FTSE 250: Pace extends gains on Netflix speculation
Satellite and cable technology firm Pace was rising strongly for the second straight day after Bloomberg reported that Netflix is in talks to add TV subscription-streaming services to set-top boxes of US cable-TV operators.
Industrial equipment rental firm Ashtead jumped after JPMorgan Cazenove raised its rating for the stock to 'overweight'.
Builder Bellway also rose after lifting its final dividend 50%, buoyed by exceptional prospects for the UK housing market and a bulging order book.
FTSE 100 - Risers
Rio Tinto (RIO) 3,201.00p +3.79%
Aberdeen Asset Management (ADN) 409.50p +3.17%
Antofagasta (ANTO) 892.50p +2.94%
Hargreaves Lansdown (HL.) 1,034.00p +2.48%
Petrofac Ltd. (PFC) 1,393.00p +2.43%
Old Mutual (OML) 195.20p +2.20%
WPP (WPP) 1,269.00p +2.17%
Anglo American (AAL) 1,556.00p +2.13%
GKN (GKN) 367.60p +1.94%
Fresnillo (FRES) 954.50p +1.87%
FTSE 100 - Fallers
Burberry Group (BRBY) 1,517.00p -4.29%
Admiral Group (ADM) 1,220.00p -0.73%
Tullow Oil (TLW) 994.00p -0.60%
RSA Insurance Group (RSA) 118.80p -0.42%
Capita (CPI) 1,004.00p -0.30%
Diageo (DGE) 1,950.00p -0.18%
Coca-Cola HBC AG (CDI) (CCH) 1,727.00p -0.12%
Schroders (SDR) 2,648.00p -0.08%
Standard Chartered (STAN) 1,469.00p -0.03%
FTSE 250 - Risers
Man Group (EMG) 83.55p +6.16%
Imagination Technologies Group (IMG) 290.00p +6.07%
Pace (PIC) 285.30p +3.93%
Rightmove (RMV) 2,501.00p +3.82%
Lonmin (LMI) 328.00p +3.60%
Ashtead Group (AHT) 650.50p +3.42%
Bellway (BWY) 1,433.00p +3.39%
Countrywide (CWD) 599.50p +3.36%
Ferrexpo (FXPO) 191.20p +3.35%
Intermediate Capital Group (ICP) 478.70p +3.19%
FTSE 250 - Fallers
Kenmare Resources (KMR) 24.25p -3.96%
RPC Group (RPC) 445.20p -2.99%
Perform Group (PER) 534.50p -2.82%
AL Noor Hospitals Group (ANH) 800.00p -2.62%
PZ Cussons (PZC) 397.70p -2.50%
Rank Group (RNK) 157.00p -2.06%
Serco Group (SRP) 526.50p -2.05%
Dignity (DTY) 1,363.00p -1.94%
Ted Baker (TED) 1,667.00p -1.83%
UDG Healthcare Public Limited Company (UDG) 323.10p -1.82%