Articles and More!: FTSE LIVE: Markets turn red as US budget crisis drags on

PUBLISHED: 03:21 EST, 7 October 2013 | UPDATED: 05:41 EST, 7 October 2013

10.50: Losses in London deepened this morning with still no end to the US budget stand-off in sight – the FTSE 100 was down 56.2 points at 6,397.7 in mid-morning trading.

Alastair McCaig, market analyst at IG, says there is an increasing ‘fear factor’ in play as the US stumbles towards hitting its debt ceiling and poor Chinese economic data is reported.

‘The news that US politicians have again put self-interest ahead of the greater good of the country by failing to make any progress in sorting out the budget or tackling the debt ceiling will have surprised few.

US crisis: Polls show most American people are against the government shutdown

‘As yet the US debt markets have remained calm but the closer we get to the mid-October deadline the less likely that is to remain the case.’

Futures trading is also pointing to a sharp fall when Wall Street reopens this afternoon.

Monex Capital Markets said: ‘Any resilience financial markets were showing at the start of last week to the impending fiscal carnage in Washington has evidently vanished, with traders now seriously having to consider the fact that the money could run out in 10 days time.’

‘We’ve already seen short dated US bond yields [short term interest rates on US government debt] spike, the dollar is broadly finding itself under attack and global equities are plotting a course lower, too.’

It added: Expect every move from Washington to be watched with increasing scrutiny as the week unfolds, but if we don’t see any real progress then next week has the potential to be nothing short of chaotic.’

9.20:

The FTSE 100 has opened down 47.4 points at 6,406.5 as investors fret over the lack of progress in breaking a political stalemate over the US budget and debt ceiling.

US Democrats and Republicans came no closer over the weekend to a budget agreement that would end a government shutdown, let alone a deal on the borrowing limit needed by October 17 to avoid an unprecedented default.

Republican House Speaker John Boehner said he would not raise the debt ceiling without a ‘serious conversation’ about what is driving the debt. Democrats said it was irresponsible and reckless to raise the possibility of a default.

Many in the markets still expect a deal to be reached to avoid the potentially catastrophic fallout of a default by the world’s biggest economy. However, Asian markets were down overnight and top German and French markets have also opened in the red this morning.

‘We’re going to wobble our way down until about Thursday and then there’s going to be a solution and there will be a melt-up,’ predicted Justin Haque, a broker at Hobart Capital Markets.

Michael Hewson of CMC Markets said: ‘Financial markets continue to seem remarkably sanguine about the goings on in Washington as we head into day seven of the US shutdown.

‘This perception appeared to be reinforced on Friday with reports that Republican House leader John Boehner was determined to do all he could to avert a government default.

‘This prompted some suggestions that he might be prepared to push a bill through to end the budget deadlock and raise the debt ceiling with the help from the moderates within his own party and all the Democrats in the chamber, in defiance of the majority of his party.

‘Mr Boehner appeared to pour cold water on that speculation over the weekend by saying that he didn’t have the votes to pass an unconditional funding bill, adding to concerns that the two parties are becoming more entrenched than ever.

‘Mr Boehner’s comments that no votes would be held on either issue unless President Obama compromises on healthcare doesn’t really leave the Republicans much in the way of wriggle room as the October deadline looms, especially given that President Obama is unlikely to negotiate on what is one of his flagship reforms.

Mike van Dulken of Accendo Markets said: ‘The congressional stalemate shows no signs of progress with House Speaker Boehner adamant that a clean spending bill will not be approved while Treasury Secretary [Jack] Lew says congress is playing with fire putting the nation’s sovereign reputation at risk, on top of President Obama’s highlighting of the potential impact on fourth quarter GDP.

‘There are also fears that October could be a lost month for important official US macro [economic] data meaning November lacks a comparable and pushes analysis into December, possibly even January.

‘Rating agency Moody’s says US default [is] extremely unlikely with debt payments being made even after the deadline.’

Stocks to watch today include:

SERCO: The global outsourcing group faces a wide-ranging government investigation into its largest state contracts, the Sunday Times reported, adding that its UK and Europe chief executive Jeremy Stafford is expected to leave.

NATIONAL EXPRESS: The transport group said it had been shortlisted for a Berlin rail contract.

THOMAS COOK: The travel and tourism company said it had sold businesses serving customers in Egypt and Lebanon.

SABLE MINING : Guinea-focused iron ore miner Sable Mining said it had been granted permission to export through Liberia by the Guinean government, which could increase the viability of its Nimba project.

PETRA DIAMONDS : The company said it was on track to meet its production targets.

ADRIATIC OIL: The oil group said it aimed to list its shares on AIM.