U.K. stocks dropped, following a second weekly loss for the benchmark index, after U.S. House Speaker John Boehner said he will attach conditions before passing a bill to increase the federal borrowing limit.
Burberry Group Plc (BRBY) slid 1.2 percent after the luxury retailer’s chief executive officer told a French newspaper that a sales slowdown in China may continue. Fresnillo Plc rose 2 percent as UBS AG advised investors to buy the shares.
The FTSE 100 Index (UKX) lost 16.6 points, or 0.3 percent, to 6,437.28 at the close of trading in London, paring a drop of as much as 1 percent. The benchmark gauge retreated 0.9 percent last week as investors weighed the economic impact of the U.S. government’s first partial shutdown in 17 years. The broader FTSE All-Share Index also declined 0.3 percent today, while Ireland’s ISEQ Index slipped 0.2 percent.
“The partial shutdown and lack of compromise between Democrats and Republicans on the budget has increased stock-market volatility and made investors more risk averse as the deadline to raise the debt ceiling approaches,” said Andre Pinheiro, a portfolio manager at Orey Financial SA in Lisbon.
U.S. lawmakers continued to wrangle over the budget for the new financial year, which started Oct. 1, in a deadlock that could spill into talks over raising the $16.7 trillion debt ceiling this month. Boehner ruled out passing a bill increasing the borrowing limit without setting preconditions.
“We are not going to pass a clean debt limit,” Boehner said in an interview yesterday on ABC’s “This Week” program. “The votes are not in the House to pass a clean debt limit.”
President Barack Obama’s administration said it won’t negotiate with Boehner’s party over funding the government or raising the debt ceiling, arguing neither should be used as points of leverage. Republicans have called for changes to Obama’s health-care law before agreeing to a new budget.
The Treasury has said that it will exhaust measures to avoid exceeding the borrowing limit on Oct. 17. If that happens, the government would run out of cash to pay all of its bills at some point between Oct. 22 and Oct. 31, according to the Congressional Budget Office.
The number of shares changing hands today in FTSE 100-listed stocks was 28 percent lower than the average of the past 30 days, data compiled by Bloomberg showed. An earnings release from Alcoa Inc. tomorrow will mark the unofficial start of the U.S. quarterly reporting season.
Burberry declined 1.2 percent to 1,608 pence. CEO Angela Ahrendts told Les Echos that a slowdown in sales from China may not be an accident but a new trend. The Asia-Pacific region was the retailer’s biggest market in the 2013 fiscal year, accounting for 39 percent of total revenue.
Marks & Spencer Group Plc (MKS) slipped 2.8 percent to 480.3 pence, its biggest drop in seven weeks. Same-store sales at its non-food division probably fell 1.5 percent in the second quarter, Credit Suisse Group AG analyst Simon Irwin wrote in a note. That compared with the analyst’s earlier prediction for growth of 0.5 percent. Marks & Spencer will report its latest financial results on Nov. 5.
Fresnillo added 2 percent to 931.5 pence. UBS upgraded its rating for the commodity producer to buy from neutral and named it among its most-preferred mining stocks, saying the company trades at an attractive value after dropping 25 percent in September. Fresnillo (FRES) trades at 29.3 times earnings projected for the next 12 months, down from 40.1 times in late August.
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