Stocks suffer on US government shutdown fear

(Alliance News) - London's FTSE 100 outperformed on a day of wider risk aversion for global markets, with US government shutdown fears keeping a lid on enthusiasm.

Helping the FTSE 100 were share price rises for Barclays and Aviva, both on the back of broker rating upgrades. Continued weakness in sterling also lifted the blue-chip index, which is stacked with international earners.

The FTSE 100 index edged up just 1.73 points at 7,625.72. The FTSE 250 lost 78.66 points, or 0.4%, at 18,336.65, and the AIM All-Share fell 4.37 points, or 0.6%, at 730.15.

The Cboe UK 100 closed up 0.2% at 761.37, the Cboe UK 250 fell 0.4% to 15,974.21, and the Cboe Small Companies lost 0.5% to 13,535.37.

In European equities on Tuesday, the CAC 40 in Paris fell 0.7%, while the DAX 40 in Frankfurt ended 1.0% lower.

Stocks in New York were lower. The Dow Jones Industrial Average dropped 0.9%, the S&P 500 slumped 1.2% and the Nasdaq Composite plunged 1.3%.

Equities suffered on a day where investors where mindful of a number of concerns. US lawmakers are yet to seal a deal to avert a government shutdown, Chinese property worries continued and the US bond market was also in focus.

The US 10-year yield spiked to nearly as high as 4.57% on Tuesday, its most robust level since October 2007.

Societe Generale analyst Kit Juckes commented: "Shutdown and downgrade concerns, month and quarter-end, talk of the US economy growing for ever and forcing the Fed to do more and inflation worries have all been cited as reasons for the latest lurch higher in US yields, but I’ll go on favouring the need to offer higher yields to attract sufficient money to finance an endless stream of Treasury auctions. The world must reallocate more of its capital to US bonds, and higher yields do the work, which then results in a stronger dollar as more money either stays in the US or is attracted in from abroad.

"This will provide the conditions for the US to slip into recession in 2024 and for the dollar to weaken once the dust settles. In the meantime, the data are robust, and the dollar is strong."

The pound was quoted at USD1.2163 at the time of the London equities close, down from USD1.2211 on Monday. The euro stood at USD1.0576, lower against USD1.0589. Against the yen, the dollar was trading at JPY148.91, higher compared to JPY148.81.

Both the pound and euro fell to lows of around six months against the dollar.

Helping the FTSE 100 outperform on Tuesday, Barclays gained 3.8%. Morgan Stanley lifted the stock to 'overweight'.

Insurer Aviva added 1.0% after Exane BNP raised it to 'neutral' from 'outperform'.

Elsewhere, Ocado added 3.5% as the grocery and warehouse technology firm continues to recover from recent share price weakness.

Bytes Technology climbed 2.4%. The Surrey, England-based reseller of computer software reported that it had "comfortably" achieved double-digit growth in both gross profit and adjusted operating profit for the six months that ended August 31.

The company said this reflected its continued market share gains in both corporate and public verticals. It added that it continued to trade strongly during the first half, with notable year-on-year growth in gross invoiced income.

"We continue to demonstrate the strength of our business model by again delivering double digit growth amid challenging macroeconomic conditions," Chief Executive Neil Murphy said.

Elsewhere in London, Videndum plunged 36% after it reported a significantly lower interim profit, blaming the writers' strike in the US. It also announced that its Chair Ian McHoul will not seek re-election at the company's annual general meeting in 2024.

The hardware product and software solutions provider said that for the six months ended June 30, pretax profit fell sharply to GBP3.1 million, from GBP22.9 million the year prior. Revenue in the half-year fell to GBP165.0 million from GBP219.4 million.

It added that given the ongoing strikes in the US, there will be no interim dividend, compared to 15.0 pence per share paid for the first half of 2022. The company plans to resume dividend payments "when appropriate."

Card Factory fell 9.4% as a warning about a "challenging economic backdrop" in the run-up to the key Christmas period overshadowed positive interim results.

The greeting cards and gifting firm said revenue in the six months to July 31 grew 12% to GBP220.8 million from GBP198.0 million a year prior. Pretax profit surged 73% to GBP24.7 million from GBP14.3 million.

Brent oil was quoted at USD92.37 a barrel late Tuesday in London, up from USD91.44 late Monday. Gold was quoted at USD1,903.23 an ounce, lower against USD1,918.62.

Wednesday's economic calendar has the latest GfK consumer climate survey for Germany at 0700 BST.

The local corporate calendar has half-year results from picture house operator Everyman Media, and annual results from car dealer Pendragon.

By Eric Cunha, Alliance News news editor

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