UK stocks were making small gains on Friday morning in light of an impressive finish on Wall Street and Asian markets overnight on the back of hopes that US lawmakers could come to a resolution over the impending debt ceiling.
Benchmarks in New York surged by at least 2% each - the Dow Jones put it its best one-day performance since December 2011 - while indices in Tokyo and Hong Kong followed suit as politicians stepped up negotiations over a short-term deal to raise the borrowing limit in order to avoid a dreaded default.
After a 1.5% jump on Thursday, the FTSE 100 was extending gains this morning, rising 0.3% to around 6,450 early on.
"Risk appetite is finally returning to the financial markets, with investors more optimistic over a deal on the debt ceiling now that both sides are finally showing a willingness to seriously negotiate," said Market Analyst Craig Erlam from Alpari.
No deal yet, but signs of progress
House Speaker John Boehner on Thursday afternoon announced a proposal to raise the limit for six weeks without conditions tied to changes in policy. He said he hopes that President Barack Obama would view the "good-faith" move as an attempt to meet him halfway on negotiations over the budget.
Obama and House Republicans failed to come to a deal following a 90-minute meeting late last night, but showed that they were still willing to negotiate. "After a discussion about potential paths forward, no specific determination was made," the White House said in a statement. "The President looks forward to making continued progress with members on both sides of the aisle."
While any deal would not automatically re-open the government - lawmakers still need to agree on a new budget - confidence in averting a default has now undeniably increased on the markets.
However, Financial Sales Trader Alex Conroy from Spreadex said that the implications for the next six weeks are" less positive", as simply delaying the issue could lead to "further volatility" on markets.
"Only the possibility of global economic Armageddon and the pressure of public opinion has forced the Republics to temporarily yield. The egregious failure of bi-partisan politics throughout this ordeal suggests this decision and apparent willingness to deal by the Republicans should be taken with a grain of salt," he said.
FTSE 350: Chemring plummets after warning on performance
Military equipment manufacturer Chemring sank sharply this morning after saying that its North American business continues to be affected by the US government shutdown and said the full impact was unknown - although it would have a definite impact on October order intake and deliveries in the US Department of Defense. It has suffered quality and production issues, particularly at Kilgore, and will also suffer from an adverse move in the sterling/dollar exchange rate, reducing operating by around £8m.
Stocks heavily exposed to the US defence markets, such as BAE Systems and Meggitt, were trading in the red.
Speciality chemicals firm Croda International was a heavy faller this morning after analysts at Liberum Capital downgraded the stock to 'hold'. In contrast, Diageo gained after Exane BNP Paribas raised the drinks giant to 'outperform'.
Restaurant and hotels owner Whitbread was also higher after Citigroup upped the stock to 'buy', saying: "Improved sentiment around the European economies suggests that we could be at the start of a renewed upgrade cycle for European focused hotel names". Whitbread gained strongly on Thursday after one analyst cited the possibility that it could spin off its Costa coffee chain.
FTSE 100 - Risers
Standard Life (SL.) 353.10p +1.93%
Shire Plc (SHP) 2,417.00p +1.51%
Whitbread (WTB) 3,157.00p +1.38%
Anglo American (AAL) 1,495.50p +1.32%
Vedanta Resources (VED) 1,028.00p +1.28%
Travis Perkins (TPK) 1,645.00p +1.23%
Admiral Group (ADM) 1,229.00p +1.15%
Aberdeen Asset Management (ADN) 387.60p +1.10%
Schroders (SDR) 2,612.00p +1.08%
Diageo (DGE) 1,941.50p +1.07%
FTSE 100 - Fallers
Croda International (CRDA) 2,537.00p -2.50%
Meggitt (MGGT) 535.50p -1.92%
BAE Systems (BA.) 443.80p -1.53%
Aggreko (AGK) 1,479.00p -0.74%
Wolseley (WOS) 3,180.00p -0.66%
Fresnillo (FRES) 930.00p -0.59%
Royal Bank of Scotland Group (RBS) 382.70p -0.57%
British American Tobacco (BATS) 3,217.00p -0.56%
Imperial Tobacco Group (IMT) 2,187.00p -0.50%
ARM Holdings (ARM) 979.00p -0.46%
FTSE 250 - Risers
Brown (N.) Group (BWNG) 485.90p +2.14%
Bwin.party Digital Entertainment (BPTY) 124.00p +1.89%
PayPoint (PAY) 1,054.00p +1.64%
Centamin (DI) (CEY) 46.87p +1.56%
Galliford Try (GFRD) 1,081.00p +1.50%
International Personal Finance (IPF) 628.00p +1.37%
3i Group (III) 358.00p +1.30%
Thomas Cook Group (TCG) 147.00p +1.24%
Betfair Group (BET) 992.00p +1.22%
Cairn Energy (CNE) 264.50p +1.03%
FTSE 250 - Fallers
Chemring Group (CHG) 232.00p -18.42%
Kenmare Resources (KMR) 25.80p -11.31%
AL Noor Hospitals Group (ANH) 811.00p -2.87%
Cobham (COB) 276.60p -2.50%
Diploma (DPLM) 617.50p -2.14%
Xaar (XAR) 782.50p -2.07%
Essar Energy (ESSR) 124.60p -1.50%
Barr (A.G.) (BAG) 514.50p -1.44%
Keller Group (KLR) 1,036.00p -1.33%
Rank Group (RNK) 162.20p -1.28%