Stocks slumped on Thursday morning as investors digested a last-minute deal in the States for a short-term increase in the debt ceiling to avert a default and reopen the government.
Markets across Europe were registering moderate declines in early trading, with London's FTSE 100 pulling back from a four-week high of 6,571.59.
Alex Conroy, Financial Sales Trader at Spreadex, said that the agreement "brings a brief respite from weeks of political mud-slinging".
However, he said that given that markets rallied yesterday in anticipation of a deal, "investors appeared positioned for the announcement and the markets could well suffer the hangover today".
With just hours to go before the US was due to hit its borrowing limit, both the Senate and House of Representatives passed a bill late on Wednesday night to fund the government through to January 15th 2014 and raise the debt ceiling until February 7th. Budget negotiations were also pushed back to December 13th.
Nevertheless, Standard & Poor's estimated that the 16-day shutdown had already cost the United States $24bn in lost economic activity, which will have a 0.6% adverse impact on gross domestic product growth in the fourth quarter. "The bottom line is the government shut-down has hurt the US economy," the ratings agency said.
FTSE 100: BSkyB, SABMiller lead gains early on
Satellite television and broadband group BSkyB surged after recording a strong rise in first-quarter revenues after an increase of 800,000 paid-for subscription products. Profits however were down after a step up in Premier League costs.
Brewing giant SABMiller gained after saying its first-half performance had been in line with expectations as strong volume growth at its African business offset a challenging environment in parts of Europe.
Sector peer Diageo, however, was flat after reporting a weakening of growth in some emerging markets in the first quarter, offset by a strong performance in US spirits. The firm also warned about exchange rates
having an adverse impact on profits this year.
Travis Perkins, the builders merchant, reported "encouraging" sales momentum in the third quarter but said that conditions in retail markets were "challenging", denting the share price early on.
Mexico-focused precious metals group Fresnillo swung between gains and losses after failing to give guidance for gold output this year following a near-10% decline in the third quarter. While silver guidance was maintained after 7.6% growth in the quarter, gold production depends on the lifting of the suspension of an explosive permit at its Herradura mine.
Packaging group Bunzl fell despite reporting 12% growth in third-quarter revenues helped by its aggressive acquisition strategy. The stock has risen by nearly a third already this year.
FTSE 100 - Risers
SABMiller (SAB) 3,161.50p +4.00%
British Sky Broadcasting Group (BSY) 911.50p +3.82%
Burberry Group (BRBY) 1,501.00p +2.53%
Unilever (ULVR) 2,437.00p +1.58%
British American Tobacco (BATS) 3,276.00p +0.80%
easyJet (EZJ) 1,286.00p +0.55%
Vodafone Group (VOD) 226.20p +0.53%
ITV (ITV) 191.00p +0.47%
London Stock Exchange Group (LSE) 1,627.00p +0.37%
Associated British Foods (ABF) 2,002.00p +0.35%
FTSE 100 - Fallers
Travis Perkins (TPK) 1,720.00p -3.26%
Weir Group (WEIR) 2,295.00p -1.84%
Randgold Resources Ltd. (RRS) 4,312.00p -1.84%
Barclays (BARC) 278.95p -1.66%
Meggitt (MGGT) 537.00p -1.65%
TUI Travel (TT.) 370.90p -1.57%
ARM Holdings (ARM) 1,014.00p -1.55%
Vedanta Resources (VED) 1,030.00p -1.53%
IMI (IMI) 1,505.00p -1.51%
Aberdeen Asset Management (ADN) 407.40p -1.48%
FTSE 250 - Risers
Man Group (EMG) 85.25p +2.83%
Ashtead Group (AHT) 667.50p +2.61%
Carpetright (CPR) 630.50p +1.69%
EnQuest (ENQ) 132.40p +1.69%
St James's Place (STJ) 650.00p +1.56%
Renishaw (RSW) 1,700.00p +1.43%
Cairn Energy (CNE) 279.80p +1.38%
UDG Healthcare Public Limited Company (UDG) 328.00p +1.20%
Kenmare Resources (KMR) 23.25p +1.09%
Bellway (BWY) 1,488.00p +0.95%
FTSE 250 - Fallers
Rank Group (RNK) 148.00p -3.90%
Menzies(John) (MNZS) 820.00p -2.56%
Mitie Group (MTO) 305.40p -2.40%
Diploma (DPLM) 645.50p -2.27%
IP Group (IPO) 134.00p -2.19%
AL Noor Hospitals Group (ANH) 806.00p -2.01%
Lonmin (LMI) 316.70p -1.95%
Fenner (FENR) 401.00p -1.93%
Alent (ALNT) 343.70p -1.80%
Senior (SNR) 273.40p -1.76%