By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- After four days in positive territory,
U.K. stocks declined on Wednesday as investors worried the
political deadlock in the U.S. could bring the global economy to
its knees. Stocks also stayed lower after data showed the U.K.
unemployment rate remained unchanged in August as expected.
The FTSE 100 index lost 0.5% to 6,518.28, partly erasing a 0.6%
gain from Tuesday.
Miners posted some of the biggest losses in the index. Shares of
Fresnillo PLC gave up 2.3%, Anglo American PLC lost 1.9%, Vedanta
Resources PLC fell 2%, and BHP Billiton PLC (BHP) slipped 1.1%.
The broader losses came as the U.S. government shutdown moved
into Day 16 and as investors worried lawmakers there won't agree on
raising the nation's debt ceiling before it runs out of borrowing
authority on Thursday. A failure to lift the limit could trigger a
technical default for the country, which some fear could in turn
ignite a global economic downturn.
Fitch Ratings put its AAA credit rating of the U.S. on negative
watch late Tuesday, citing the prolonged congressional negotiations
and the political brinkmanship surrounding them.
In the U.K., data showed the unemployment rate held steady at
7.7% in the period from June to August, matching expectations from
most analysts. Meanwhile, employment rose to a record high, and
jobless claims for September dropped by 41,700 from August, in the
latest sign the country's job market is improving.
Joblessness data from the U.K. have risen in prominence after
the Bank of England in August said it will not consider a hike in
the rate until the unemployment rate drops below 7%.
"The data add to evidence that unemployment is set to fall
faster than the Bank of England has anticipated, meaning a hike in
interest rates would in theory be justified earlier than 2016, as
currently envisaged under the Bank's 'forward guidance,'" said
Chris Williamson, chief economist at Markit, in a note.
"The worry is that any hike in interest rates before real
incomes start to revive would set the economic recovery back
significantly, as rising demand for staff is still not feeding
through to higher wages," he added.
Among other notable movers in London, Burberry Group PLC gave up
2.3%, building on a 7.6% loss from Tuesday, when news that Apple
Inc. (AAPL) named the luxury-goods firm's Chief Executive Angela
Ahrendts as senior vice president of retail and online stores hit
the stock.
Shares of IMI PLC added 2.1% on news Marmon Group LLC, the
industrial arm of Warren Buffett's Berkshire Hathaway Inc. (BRK/A),
has bought the drinks dispensing and merchandising divisions of the
British engineering company.
Shares of BT Group PLC rose 0.5% after Goldman Sachs added the
telecom firm to its conviction list and reiterated the buy rating
on the stock.
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