By This Is Money Reporters
PUBLISHED: 02:39 EST, 10 October 2013 | UPDATED: 09:53 EST, 10 October 2013
15:45: The Footsie remains in positive territory this afternoon spurred on by a rally on Wall Street which has raced ahead by 200 points in its first hour of trading as hope of a possible resolution to the US government shutdown.
The Dow Jones Industrial Average is now 206 points, or 1.4 per cent, higher at 15,009. Meanwhile the US dollar rose to a two-week high against a basket of major currencies.
Treasury prices have slipped, sending yields higher, as signs of progress in Washington buoyed risk appetite. The benchmark 10-year note rose 4.5 basis points to 2.709 per cent.
US crisis: Democrats want a no-strings budget resolution and debt ceiling hike passed before they negotiate with Republicans led by John Boehner, pictured right
In London the FTSE 100 Index has pushed higher by 0.5 per cent in the last hour as investors took heart from the rally across the Atlantic taking it 1.4 per cent higher on the day to 6,426.
Overnight a Republican leadership aide, U.S. House of Representatives Republicans are considering agreeing to a short-term increase in the government’s borrowing authority, keeping a possible default after October 17 at bay and buying time for negotiations on broader policy measures.
Markets have also been lifted by the nomination of Janet Yellen by US president Barack Obama to the post of Federal Reserve chair. Believed to be a fiscal policy dove, Ms Yellen is seen likely to postpone any tapering of the central bank’s massive monthly asset purchase programme until at least the start of next year.
14:35: Shares in London are just shy of 1 per cent higher in afternoon trading as hope of a resolution to the political deadlock over budget negotiations in the US were raised overnight.
The FTSE 100 Index is 0.97 per cent higher at 6,399 while in the US the Dow Jones Industrial Average opened just a few moments ago sharply higher also up 1 per cent at 14,947.16.
According to a Republican leadership aide, U.S. House of Representatives Republicans are considering agreeing to a short-term increase in the government’s borrowing authority, keeping a possible default after October 17 at bay and buying time for negotiations on broader policy measures.
President Barack Obama and congressional leaders are set to meet on Thursday for further discussions.
‘There is one major ‘if’ attached to the President’s potential olive branch, and that is reopening the government, something that still looks very unlikely in the interim as the partisan politics from both sides continues to rage,’ Evan Lucas, an analyst at IG, said in a morning note.
Markets have also been lifted by the nomination of Janet Yellen by US president Barack Obama to the post of Federal Reserve chair. Believed to be a fiscal policy dove, Ms Yellen is seen likely to postpone any tapering of the central bank’s massive monthly asset purchase programme until at least the start of next year.
12.15: The FTSE 100 has extended morning gains to move 66.5 points higher to 6,404.4.
‘Reassurances from the US that short-term measures will be instigated to avert the upcoming debt-ceiling deadline have given European equity markets a jolt upwards, helping to stem some of the risk aversion of the past few days,’ said Brenda Kelly of IG.
‘News that Hong Kong has raised collateral haircuts [increased its buffers against risk] on US treasury bills appears to be something of a warning shot to US politicians.
‘The implications are that US treasury bonds are considered broadly more risky and the Hong Kong exchange is clearly preparing for the worst case scenario – a US default. The more likely explanation is that Hong Kong is simply telling the US to get its act together.’
10.50:
The FTSE 100 has rallied 47.7 points to 6,385.6 on hopes that US politicians will cobble together some kind of deal to avoid a debt default, if only for a short while before they inevitably resume hostilities.
In London, SSE shares rose 22.5p to 1476.5p after the energy firm said it was increasing average bills by 8.2 per cent from November, while British Gas rival Centrica was 5.25p higher at 366.05p on expectations it will follow suit.
Charles Church housebuilder Persimmon was again prominent on the FTSE 100 risers board amid expectations that it will reap the benefit of the Government’s Help to Buy housing scheme. Shares rose 24.5p to 1155.5p, having climbed by 5 per cent yesterday.
Shares in retail chain WH Smith jumped 8 per cent or 66p to 901p in the FTSE 250 after it posted a 6 per cent rise in full-year profits to £108million and said it would return another £50million to shareholders.
And Ladbrokes was 6 per cent higher, up 10.9p to 190.7p, as fresh takeover talk was ignited by the mystery purchase of a near 3 per cent stake in the struggling firm.
Monex Capital said of the latest developments in Washington: ‘Lawmakers in Washington do seem now to be accepting just how big the fall-out would be for both the US and the global economy in the event of the debt ceiling being breached.
‘As such there have been murmurings that a short-term increase in the borrowing limit may be on the table, although with a week to run until doomsday, there will doubtless be further political grandstanding to be seen.
‘Regardless, both the dollar and equities across the globe are finding support off this news.’
Matt Basi of CMC Markets said: ‘Any evidence of politicians coming back to the negotiating table was always going to be met with some kind of relief rally, so today’s move will not be a huge surprise to the market majority, but reading between the lines it would seem that this optimism could still be short lived.
‘Firstly, while Republicans seem to be readying something to take to the President, reports still suggest that the proposal would have “attachments”, and Obama has continuously stated that there will be no concessions from the ruling house, so this would indicate someone has to swallow what is left of their pride and give in.
‘It seems from reports that the Republicans have given up on their attack on Obamacare to move to pastures new, perhaps giving room for the two sides to meet somewhere in the middle on other issues.
‘The other thing to note is that anything passed looks to at best stall, only to endure it all again in the near future. So yet again it appears the job of the US politician is simply to apply a strong foot to that poor old can on a never ending road, rather than to find a cure. So for the markets…relief yes, solution no.’
8.35:
The FTSE 100 has opened up 22.5 points at 6,360.4 amid signs of progress to end the US budget stand-off and prevent a possible debt default.
US Republicans are considering a short-term hike in the government’s borrowing authority to buy time for talks on broader policy issues, a party leadership aide said.
President Barack Obama has said he would accept a short-term ceiling debt increase as long as no strings were attached. House Republican leaders will visit the White House today as the search intensifies for a way to break the impasse.
But Capital Spreads commented: ‘This meeting already looks like a non starter. Although a positive start is expected today, traders should be wary about the meeting resembling a boxing match weigh-in and knocking any optimism about the political stalemate out for the count.’
Wall Street and Asian markets rose overnight. However, the FTSE 100 closed down 27.92 points at 6,337.91 yesterday, its lowest closing level since ending at 6,229.87 on July 3.
Investors will keep an eye on today’s meeting of the Bank of England, although it is expected to leave interest rates unchanged despite more signs of economic strength – sticking to its commitment of a freeze at 0.5 per cent while joblessness stays above target.
Stocks to watch today include:
BARCLAYS: Senior investment banker John Miller was appointed to the newly created position of head of banking for the Americas, according to an internal memo seen by Reuters.
ROYAL DUTCH SHELL: Shell Nigeria said it had shut down its Trans Niger Pipeline owing to reports of leaks, deferring 150,000 barrels per day of crude oil just 10 days after the pipeline was re-opened.
GKN: Informa’s Adam Walker will join the GKN board next January as group finance director, succeeding William Seeger who intends to step down from the board on 25 February.
MELROSE: The corporate turnaround specialist agreed to sell Crosby and Acco to KKR for $ 1billion.
BAE SYSTEMS: The defence contractor said its earnings could be hit by 6-7 pence per share should it fail to reach agreement on a jet deal with Saudi Arabia this year.
SSE: The energy supplier said it would raise its household charges for electricity and gas by an average of 8.2 per cent next month.
ASHMORE: The asset manager reported total assets under management for the first-quarter were estimated at $ 78.5billion, up 1.4 per cent in the previous quarter and in line with management’s expectations.
HAYS: The recruiter reported net fees were up 2 per cent on an organic basis.
WH SMITH: The retailer said annual profit rose 6 per cent to £108million and its total dividend was up 14 per cent to 30.7 pence per share. It announced plans to buy back an additional £50million worth of shares.
AIR PARTNER: The aviation company reported full-year profit up 31 per cent on revenue down 3 percent to £220.6million. It said trading prospects for the six months to 31 January 2014 were currently in line with expectations.
SYNERGY HEALTH: The specialist servicer to healthcare providers said trading was in line with its expectations.
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Bloomberg – by Laurel Calkins
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