Concerns over a potential government shutdown in the US, political chaos in Italy and disappointing economic figures from China sparked steep falls on equity markets across Europe on Monday morning, with the FTSE 100 slipping to levels not seen in a month.
The FTSE 100 was trading around 0.85% lower at 6,457 by lunchtime in London with stocks in the heavyweight mining sector providing a drag. The last time the index closed lower was on August 30th when it ended the day at 6,412.93.
US politicians have so far failed to agree a new spending bill and have only until midnight tonight to reach an agreement that would allow them avert a partial government shutdown. Market Strategist Ishaq Siddiqi from ETX Capital said that a shutdown "could drag on US economic growth at an extremely fragile time."
The House of Representatives yesterday voted to tie-in a delay of the 'Obamacare' health act to its Budget 2014 proposal. It is now up to the Senate to approve the bill later today; however, the Democrats have already stated that they would not agree to such a measure.
As well, and in the coming weeks, Congressmen will have no choice but to iron-out an agreement or risk going past the October 17th deadline for extending the current debt-ceiling limit of $16.7tn and for the US government to avoid defaulting on its debt.
"Now, at a time when economic growth is fragile at best, the market is now working out the implications of what the economic impact could be on Q4 growth. Not always easy to measure something like this as talks between lawmakers continues but what is fast accepted in the market is that tapering by the Fed may be held off for this year," Siddiqi said.
Over in Italy, centre-right leader Silvio Berlusconi pulled his ministers out of their five-month-old coalition, putting Prime Minister Enrico Letta's government in a difficult position. Letta and President Giorgio Napolitano are anticipated to seek a new parliamentary majority to support a cabinet and avoid elections.
The HSBC China purchasing managers' index came in at 50.2 in September, significantly below estimates of 51.2 and under last month's reading of 50.1. A readings of 50 separates expansion and contraction. HSBC China Chief Economist, Hongbin Qu, said: "Growth is bottoming out on Beijing's mini-stimulus. We expect continuous policy efforts to sustain the recovery."
Economic data closer to home was upbeat this morning: house prices in England and Wales rose by 0.5% month-on-month in September, according to Hometrack, the biggest gain in more than six years since May 2007; meanwhile UK mortgage approvals for house purchases rose 2.1% to 62,226 in August, their highest level in over five years, the Bank of England said.
The UK government also announced this weekend that it will launch the second phase of the 'Help to Buy' scheme next week, two months earlier than originally anticipated.
FTSE 100: Miners sink sharply after Chinese data
Mining stocks declining sharply this morning on the back of the disappointing data from the world's top metals user, China. Fresnillo, Anglo American, Antofagasta ,Glencore Xstrata and Rio Tinto were all falling sharply this morning.
Financials were also under the weather due to a reduction in risk appetite with Aberdeen Asset Management, RBS, Standard Life and Aviva in the red.
In turn, sectors such as pharmaceuticals and utilities were performing well due to their defensive characteristics. SSE, United Utilities, Severn Trent and Centrica edged higher, along with AstraZeneca and Shire. Shire was also being helped higher by JPMorgan Cazenove which upgraded the stock to 'overweight'.
Similarly, High Street bookie William Hill was higher after Deutsche Bank lifted its recommendation for the shares
Housebuilder Persimmon was among the better performers this morning after today's news from the UK housing market and an upgrade from JPMorgan to 'overweight'. Persimmon sank sharply last week as investors reacted to comments over stimulus from government officials as well as the news that the company is halting building work in some parts of the south Wales valleys.
FTSE 250: Housing stocks gain on 'Help to Buy', economic data
Barratt Development, Tayloy Wimpey and Bellway were among the best performing stocks on the FTSE 250 this morning as the outlook for the UK housing market continues to brighten. JPMorgan upgraded its rating for Barratt today to 'overweight' but cut Bovis Homes to 'underweight'.
Miners were leading the downside with Kazakhmys, EVRAZ, Polymetal and Ferrexpo registering moderate losses.
FTSE 100 - Risers
Persimmon (PSN) 1,083.00p +2.07%
SSE (SSE) 1,487.00p +1.29%
AstraZeneca (AZN) 3,227.00p +0.81%
United Utilities Group (UU.) 694.00p +0.65%
Shire Plc (SHP) 2,481.00p +0.57%
William Hill (WMH) 404.00p +0.50%
Tate & Lyle (TATE) 741.50p +0.47%
Centrica (CNA) 368.00p +0.27%
Severn Trent (SVT) 1,773.00p +0.11%
Capita (CPI) 995.50p +0.10%
FTSE 100 - Fallers
Fresnillo (FRES) 964.00p -3.60%
Glencore Xstrata (GLEN) 332.90p -3.23%
Anglo American (AAL) 1,492.00p -3.12%
Rio Tinto (RIO) 2,977.50p -2.92%
Antofagasta (ANTO) 806.00p -2.89%
GKN (GKN) 342.30p -2.78%
Aberdeen Asset Management (ADN) 377.50p -2.43%
Randgold Resources Ltd. (RRS) 4,409.00p -2.26%
Royal Bank of Scotland Group (RBS) 358.30p -2.24%
Resolution Ltd. (RSL) 316.40p -2.13%
FTSE 250 - Risers
Bellway (BWY) 1,307.00p +3.57%
Kenmare Resources (KMR) 28.80p +2.86%
Taylor Wimpey (TW.) 99.35p +2.42%
Savills (SVS) 622.00p +2.30%
Barratt Developments (BDEV) 308.80p +2.22%
Redrow (RDW) 231.20p +1.85%
Playtech (PTEC) 734.00p +1.80%
BH Global Ltd. USD Shares (BHGU) 11.82 +1.63%
Keller Group (KLR) 1,015.00p +1.30%
Debenhams (DEB) 102.20p +1.29%
FTSE 250 - Fallers
Kazakhmys (KAZ) 262.00p -4.34%
Imagination Technologies Group (IMG) 325.10p -4.10%
ITE Group (ITE) 263.30p -3.66%
Polymetal International (POLY) 646.50p -3.51%
Evraz (EVR) 123.70p -3.36%
Menzies(John) (MNZS) 782.50p -3.28%
Intermediate Capital Group (ICP) 439.00p -3.13%
Man Group (EMG) 83.75p -2.90%
Ferrexpo (FXPO) 174.00p -2.79%
Oxford Instruments (OXIG) 1,235.00p -2.76%