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The FTSE 100 has been in positive territory for most of the day, as a mixture of short-covering and bargain-hunting has kept stocks in demand. The London benchmark index has had a four-day losing streak, but better-than-expected services data from China and the eurozone could help the market break the cycle.
Airliner easyJet got off to a good start by announcing that its full-year profit will come in at the top end of analysts' estimates, but soon came back to earth as profit-taking set in. Aviva pulled in an additional $800 million from the sale of its US operation to a Bermuda-based insurer.
The political stalemate in Washington set the wheels in motion for the sell-off, but the final nail in the coffin came when the CME hiked margin requirements for index futures. Exchanges don’t have a history of increasing margins when blue skies are ahead. The deadlock over the budget is of minor importance; the major issue is the debt-ceiling deadline, and if relations haven’t improved by mid-October we could be looking at another downgrade. The partial shutdown in the US is starting to take its toll though, and the key non-farm payrolls report will now not be announced tomorrow due to the bickering between both parties.
Gold has given up some of yesterday’s gains as profit-taking has set in. The precious metal is now sliding back towards its eight-month low. Copper is also in decline as traders are worried about growing stockpiles.
The pound is weaker after the UK services report came in below estimates. Sterling has had a stellar run recently, so it is no surprise to see some profits being booked.