London's FTSE 100 pulled back from a three-week high on Wednesday morning as a deal to avert a US default remained elusive with just one day to go before the government hits its borrowing limit.
Matt Basi, Head of UK Sales Trading at CMC Markets, said that the proximity of the deadline was "giving traders cause to take some risk off the table".
"Cyclical names are bearing the brunt of the selling, with concerns over global growth well founded given the impact of the US government shutdown so far," he added.
Closer to home, data from the Office for National Statistics showed that UK jobless claims fell by the most in 16 years in September, while the unemployment rate was unchanged at 7.7% in the three months to August.
However, with just one day before the US is set to hit its debt ceiling, developments on Capitol Hill are likely to determine the direction of markets during today's session. The FTSE 100 was registering moderate losses in morning trade after hitting 6,549 on Tuesday, its highest level since September 24th.
Following some decent gains for global markets over recent sessions - which saw the S&P 500
come within close to its record closing high - sentiment was dampened yesterday after talks over a House proposal to suspend the borrowing limit and fund the government through to early 2014 fell apart.
Senate Majority Leader Harry Reid and Republican Minority Leader Mitch McConnell resumed discussions last night with both parties saying they were confident that "an agreement is within reach".
Fitch was putting further pressure on lawmakers after placing its prized 'AAA' credit rating for the US on 'negative watch'. The ratings agency said that prolonged negotiations risk "undermining confidence in the role of the US dollar
as the pre-eminent global reserve currency, by casting doubt over the full faith and credit of the US".
IMI jumps after in-line Q3, Anite plummets
Engineering group IMI pleased investors this morning with the $1.1bn disposal of its Beverage Dispense and Merchandising divisions and a proposed cash return of £620m. The company also said that third-quarter results were in line with expectations with revenue 3% ahead of last year.
Shares in wireless testing group Anite collapsed by more than a third after the company warned sales and profits were being held back due to slower mobile handset testing activity. The unit would only breakeven in the first half, it said.
Telecoms giant BT was higher after Goldman Sachs upgraded the stock to 'conviction buy'. Serco and Kentz Corp also advanced after both stocks were lifted by HSBC to 'overweight'.
Gold miner Randgold gained after Nomura raised target prices across the sector, saying that it sees upside to gold prices
over the next few months. The broker however cut its ratings for Polymetal and Centamin, pressuring these stocks lower this morning.
Luxury brand Burberry declined for a second straight day after the surprise exit of long-running chief Angela Ahrendts. Current Chief Creative Officer Christopher Bailey is to be her successor, though some analysts raised concerns about his level of experience.
Meanwhile, financial services firm Hargreaves Lansdown was extending gains after yesterday reporting record levels of assets under administration in the fiscal first quarter.
FTSE 100 - Risers
Hargreaves Lansdown (HL.) 1,063.00p +2.21%
IMI (IMI) 1,521.00p +1.47%
Randgold Resources Ltd. (RRS) 4,461.00p +1.39%
ITV (ITV) 189.60p +1.39%
TUI Travel (TT.) 377.80p +0.75%
Royal Dutch Shell 'B' (RDSB) 2,156.50p +0.63%
Coca-Cola HBC AG (CDI) (CCH) 1,738.00p +0.46%
Aviva (AV.) 429.90p +0.40%
Barclays (BARC) 280.95p +0.39%
BT Group (BT.A) 355.60p +0.34%
FTSE 100 - Fallers
Fresnillo (FRES) 923.00p -3.15%
Burberry Group (BRBY) 1,430.00p -2.32%
Anglo American (AAL) 1,535.00p -2.17%
Schroders (SDR) 2,588.00p -2.04%
Bunzl (BNZL) 1,304.00p -1.95%
Reckitt Benckiser Group (RB.) 4,279.00p -1.95%
Aggreko (AGK) 1,458.00p -1.82%
Rolls-Royce Holdings (RR.) 1,095.00p -1.79%
Croda International (CRDA) 2,491.00p -1.77%
easyJet (EZJ) 1,250.00p -1.73%
FTSE 250 - Risers
Senior (SNR) 269.80p +1.85%
Domino Printing Sciences (DNO) 677.00p +1.80%
NMC Health (NMC) 335.00p +1.52%
Kentz Corporation Ltd. (KENZ) 524.50p +1.45%
Synthomer (SYNT) 244.90p +1.16%
Fisher (James) & Sons (FSJ) 1,104.00p +1.10%
Genus (GNS) 1,352.00p +0.90%
Kier Group (KIE) 1,757.00p +0.86%
Britvic (BVIC) 591.00p +0.85%
Pace (PIC) 287.90p +0.81%
FTSE 250 - Fallers
Kenmare Resources (KMR) 22.94p -6.94%
Spirent Communications (SPT) 119.80p -5.82%
Polymetal International (POLY) 519.00p -5.38%
IP Group (IPO) 132.00p -3.86%
Diploma (DPLM) 630.00p -3.82%
Edinburgh Inv Trust (EDIN) 551.00p -3.76%
Homeserve (HSV) 233.70p -3.67%
Carpetright (CPR) 627.50p -3.09%
National Express Group (NEX) 251.90p -3.00%
Hochschild Mining (HOC) 154.40p -2.95%