Political uncertainty in the US and Italy along with disappointing economic figures from China weighed heavily on risk appetite on Monday morning with mining stocks bearing the brunt of the selling.
The FTSE 100 opened around 0.8% lower at 6,458.29 in early trading; the last time it closed lower was on August 30th when it ended the day at 6,412.93.
"Unsurprisingly, safe-haven assets have been the destination of a lot of the cash leaving risk assets. High-quality fixed income, Swiss francs and dollars have been in demand against this sell-off and will continue to be so until a catalyst can stabilise or reverse sentiment," said Financial Trader David White from Spreadex.
US politicians have so far failed to agree a new spending bill and have only until midnight tonight to make a decision over an extension to the current debt-ceiling limit of $16.7tn to avoid a government shutdown. The House of Representatives yesterday voted to tie in a delay of the 'Obamacare' health act to its extension of the debt-ceiling deadline. 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.
"This is just one example of the games still being played in Congress, as we approach the deadline, and both parties are as guilty as each other for creating so much uncertainty for the financial markets," said Market Analyst Craig Erlam from Alpari.
Meanwhile 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.
HSBC's 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."
As for economic data closer to home, house prices in England and Wales rose by 0.5% month-on-month in September and are now up by 2.4% since the same month of one year ago, according to a survey from property analysis firm Hometrack. That was their biggest month-on-month gain in more than six years, since May 2007.
Miners sink sharply after Chinese data
Mining stocks were shrugging off an upturn in metals prices this morning and instead fell on the back of the disappointing data from the world's top metals user, China. Glencore Xstrata, Anglo American, Rio Tinto, Fresnillo, Antofagasta and Randgold Resources were all falling sharply this morning.
Housebuilder Persimmon was among the better performers this morning, rebounding after some heavy falls on Friday after today's upbeat data from the UK housing market and an upgrade from JPMorgan Cazenove 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.
Housing peers Barratt Development, Tayloy Wimpey and Bellway were also higher this morning. Bovis Homes however was in the red after JPMorgan downgraded the stock to 'underweight'.
High Street bookie William Hill was higher after Deutsche Bank lifted its recommendation for the shares
to 'buy', while pharmaceutical firm Shire was upgraded by JPMorgan to overweight'.
FTSE 100 - Risers
William Hill (WMH) 410.30p +2.06%
Persimmon (PSN) 1,074.00p +1.23%
Tate & Lyle (TATE) 741.50p +0.47%
Vedanta Resources (VED) 1,076.00p +0.28%
Shire Plc (SHP) 2,474.00p +0.28%
G4S (GFS) 254.30p +0.16%
Tesco (TSCO) 363.00p +0.11%
United Utilities Group (UU.) 690.00p +0.07%
FTSE 100 - Fallers
Aberdeen Asset Management (ADN) 372.60p -3.70%
Glencore Xstrata (GLEN) 335.65p -2.43%
Travis Perkins (TPK) 1,612.00p -2.18%
Rio Tinto (RIO) 3,000.00p -2.18%
GKN (GKN) 344.50p -2.16%
Anglo American (AAL) 1,507.00p -2.14%
Standard Life (SL.) 344.10p -2.11%
Melrose Industries (MRO) 293.00p -2.07%
Weir Group (WEIR) 2,320.00p -2.03%
easyJet (EZJ) 1,250.00p -1.88%
FTSE 250 - Risers
BH Global Ltd. USD Shares (BHGU) 11.83 +1.72%
Redrow (RDW) 230.20p +1.41%
Playtech (PTEC) 730.00p +1.25%
BH Macro Ltd. USD Shares (BHMU) 20.68 +1.08%
Hochschild Mining (HOC) 181.90p +1.00%
Savills (SVS) 614.00p +0.99%
Kenmare Resources (KMR) 28.26p +0.93%
Keller Group (KLR) 1,011.00p +0.90%
UK Commercial Property Trust (UKCM) 75.50p +0.87%
Barratt Developments (BDEV) 304.70p +0.86%
FTSE 250 - Fallers
Menzies(John) (MNZS) 782.50p -3.28%
Oxford Instruments (OXIG) 1,229.00p -3.23%
Imagination Technologies Group (IMG) 328.40p -3.13%
Crest Nicholson Holdings (CRST) 326.10p -2.80%
Dialight (DIA) 1,099.00p -2.74%
Fidessa Group (FDSA) 1,958.00p -2.68%
Intermediate Capital Group (ICP) 441.50p -2.58%
Henderson Group (HGG) 187.50p -2.45%
QinetiQ Group (QQ.) 191.70p -2.29%
Lonmin (LMI) 317.20p -2.19%