U.K. stocks fell to their lowest level in a month, paring a quarterly gain, as Italy’s government faced collapse and the U.S. government neared a partial shutdown that would slow growth in the world’s biggest economy.
A measure of London-listed mining stocks slipped to a four-week low as a report showed manufacturing in China expanded at a slower pace than economists had predicted. Salamander Energy Plc (SMDR) slumped 9.6 percent after saying it abandoned an exploratory well in the Gulf of Thailand. Persimmon Plc (PSN) gained 2.4 percent as JPMorgan Chase & Co. upgraded its rating on the housebuilder.
The FTSE 100 Index lost 50.44 points, or 0.8 percent, to 6,462.22 at the close of trading in London. The equity benchmark still gained 0.8 percent this month as the Federal Reserve unexpectedly refrained from reducing its monthly asset purchases. The gauge rose 4 percent in the third quarter, bringing its advance so far this year to 9.6 percent. The broader FTSE All-Share Index also fell 0.7 percent today, while Ireland’s ISEQ Index slipped 0.1 percent.
“It seems an impossibility to form a stable government in Italy that can guide it through the structural reforms it urgently needs,” said Jeremy Gaudichon, who helps oversee about $1.1 billion at KBL Richelieu Gestion in Paris. “This is a very negative message for the markets. Negotiations in the U.S. have been extremely tough.”
The number of shares changing hands today in FTSE 100-listed stocks was 6.5 percent lower than the average of the past 30 days, data compiled by Bloomberg showed.
In Italy, Prime Minister Enrico Letta said he will request a confidence vote for Oct. 2 in an attempt to find a new parliamentary majority for his government. Silvio Berlusconi withdrew his support and pulled his ministers out of the cabinet on Sept. 28. The governing coalition had relied on the votes of lawmakers from the People of Liberty to pass its laws.
U.S. politicians have just one day to end a stalemate that raises the risk of the first partial shutdown since 1996, following a weekend without negotiations or compromise from either the Senate or the House of Representatives to avert it.
Failure to approve funding to keep the government open would reduce fourth-quarter economic growth by as much as 1.4 percentage points at an annual pace, according to economists. The biggest effect would come from the output lost from absent federal employees.
The House voted 231-192 yesterday to make further funding for the federal government conditional on the suspension of the central provisions of President Barack Obama’s health-care legislation. Should the Senate reject the bill today, the government may shut down from tomorrow.
In China, the purchasing managers’ index from HSBC Holdings Plc and Markit Economics rose to 50.2 in September from 50.1 in August. The final number fell short of the 51.2 median estimate in a Bloomberg News survey, the same figure as last week’s preliminary reading.
A measure of London-listed commodity producers slipped 1.5 percent as BHP Billiton Ltd. (BHP) declined 1.1 percent to 1,820 pence and Rio Tinto Group lost 1.4 percent to 3,023 pence. Glencore Xstrata Plc dropped 2.1 percent to 336.7 pence.
Salamander declined 9.6 percent to 117.5 pence. The oil explorer plugged its offshore well after failing to find significant indications of oil or gas, according to a statement.
Albemarle & Bond Holdings (ABM) Plc slumped 40 percent to 74.5 pence, its lowest price in a decade. The pawnbroker said it plans to raise 35 million pounds ($57 million) in a rights issue to prevent the company from breaking its debt covenants as profits tumble with the price of gold.
Persimmon gained 2.4 percent to 1,080 pence after JPMorgan raised the stock to overweight, which is similar to a buy rating, from neutral. Concerns that the government will withdraw its Help to Buy house-buying plan are misplaced, analyst Emily Biddulph wrote in a note. The stock still posted its worst quarter in more than three years.
Barratt Developments Plc (BDEV) climbed 2.2 percent to 308.6 pence, while Bellway Plc (BWY) rose 4.2 percent to 1,315 pence as a report from Hometrack, a property researcher, showed average house prices jumped in September. Separately, Prime Minister David Cameron said the second phase of Help to Buy, which extends the plan beyond new-build properties, will start next week, three months earlier than planned.
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