U.K. Stocks Decline Amid U.S. Debt-Limit, Budget Impasse

U.K. stocks fell for a third day, extending a three-month low, as U.S. lawmakers continued to wrangle over raising the government’s debt limit before next week’s deadline and a spending measure to end a shutdown.

Vedanta Resources Plc tumbled to a three-month low after reporting a decline in copper output in Zambia. N Brown Group Plc dropped 5.1 percent after first-half profit missed estimates. Persimmon Plc and Barratt Developments Plc rallied at least 3.5 percent each after Goldman Sachs Group Inc. said it expects a strong recovery in the U.K. housing market.

The FTSE 100 Index retreated 27.92 points, or 0.4 percent, to 6,337.91 at the close in London, as U.S. President Barack Obama picked Janet Yellen to head the Federal Reserve. The equity benchmark has decreased 4.3 percent from a high on Sept. 19. The broader FTSE All-Share Index also lost 0.4 percent today, while Ireland’s ISEQ Index fell 0.7 percent.

“I’m surprised by the lack of pragmatism displayed by U.S. politicians,” said Espen Furnes, who helps oversee $75 billion as fund manager at Storebrand Asset Management in Oslo. “The fact that they’re willing to let the U.S. economy and indeed the U.S. citizens suffer from the need to make political statements is hard to grasp and a bit scary. The Yellen nomination takes away some worries about who will be named and gives more clarity on future Fed policy.”

Tesco Plc, Aviva Plc and five other companies traded without the rights to their latest dividend today, shaving off 3.7 points from the FTSE 100.

Shutdown Continues

Republicans and Democrats remained divided on the terms of an emergency budget and raising the $16.7 trillion debt ceiling even as a partial U.S. government shutdown entered its ninth day. The closure has placed thousands of federal employees on unpaid leave and led to the suspension of some services.

Obama said yesterday the world’s largest economy risks a recession if Congress fails to raise the debt limit. He said he is willing to talk to Republicans on changes to his health-care act after lawmakers unconditionally raise the ceiling and agree on a budget to end the shutdown. Republican Speaker John Boehner has said the House can’t pass a bill to increase the limit without conditions.

The Treasury has said it will exhaust measures to avoid breaching the debt limit on Oct. 17. If that happens, the U.S. will run out of money to pay all of its bills at some point between Oct. 22 and Oct. 31, according to the Congressional Budget Office.

Obama will today nominate Janet Yellen to replace Ben S. Bernanke as the next Fed chairman, a White House official said in an e-mailed statement. Yellen is now the vice chairman of the Fed.

Zambian Copper

Vedanta tumbled 4.7 percent to 1,020 pence, its lowest price since July 8. The India-focused metal and oil producer said copper production in Zambia fell 26 percent in the fiscal second quarter because of a suspension of mining operations. Vedanta also said iron-ore mining in the states of Goa and Karnataka remained suspended.

Separately, Morgan Stanley cut its rating on the shares to underweight, similar to sell, from equal-weight, saying the company’s Konkola unit is trading at an unwarranted premium to its global peers.

N Brown Group Plc tumbled 5.1 percent to 489 pence, the biggest drop since December 2011, after reporting first-half pretax profit excluding some items of 45 million pounds ($72 million), trailing the 45.5 million-pound median estimate of analysts in a Bloomberg survey. Overall gross margin fell by 80 basis points to 52.5 percent because of an increase in bad debts, the retailer said in a statement.

Housing Market

Persimmon, the U.K.’s biggest homebuilder by market value, advanced 5 percent to 1,131 pence and Barratt climbed 3.6 percent to 320 pence.

“Lead indicators in the U.K. housing market point towards a strong rebound following five years of depressed activity levels,” Goldman Sachs analysts Raghav Bardalai and Eshan Toorabally wrote in a note. “We expect the ‘Help to Buy’ scheme to stimulate market transactions,” they wrote, referring to the British government’s equity-loan plan.

Crest Nicholson Holdings Plc gained 4.2 percent to 343.5 pence as Goldman Sachs started coverage of the homebuilder with a buy recommendation.

Greggs Plc added 2.6 percent to 438.4 pence after the U.K.’s biggest bakery chain said a decline in same-store sales slowed to 0.5 percent in the third quarter, compared with a drop of 2.9 percent in the first half.

The volume of shares changing hands in FTSE 100-listed companies today was 10 percent lower than the daily average in the past 30 days, according to data compiled by Bloomberg.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE