Long-term US debt solution haunts markets

Heading into the close the FTSE 100 is down 20 points, although it is comfortably off its lows for the day.

Having jumped out the way of one oncoming train, the US has merely jumped into the path of another, although this one is slightly further down the tracks. Widespread disapproval of this avoidance tactic can be seen in the negativity that has engulfed equity markets and covered traders' screens in red.

BSkyB leads FTSE gainers

Having seen how much bad press SSE obtained by raising average prices by 8.2%, British Gas has gone one better and increased its average by 9.2%. One wonders where we will stand once the remaining four major power suppliers have shown their hands.

British Sky Broadcasting, the highest climber in the FTSE 100, has appeared to up its game following the introduction of BT as a competitor in the sports coverage arena, as they have 111,000 new broadband customers from this time last year, with revenue up a healthy 7%.

SAB Miller has once again seen a similar pattern of improving figures in developing regions, offsetting struggling sales in Europe and North America. Travis Perkins has continued to benefit from the government's efforts to stimulate the housing markets, with total sales increasing by 8.6%.

US debt on negative watch

It is hard to feel that anyone has come away from these discussions with anything other than an eroded reputation. A lack of leadership and the inability of the two parties to come to an agreement in a timely fashion has directly led to Fitch putting US debt on a negative watch. After more than two weeks of a government shutdown, the cost to the economy is expected to be around $24 billion and as much as the US may be further down the road to recovery than Europe, that recovery is still in its infancy.

You would like to believe that President Obama has learnt from this and will ensure we do not find ourselves in a similar situation in three months’ time, but few on the City's trading floors believe that. Only two months ago markets were anticipating that the Federal Reserve would begin to gradually reduce its quantitative easing policy, but this now looks highly unlikely to happen in 2013.

Gold gains $35 by midday

Judging by the reaction in the gold prices, markets were never really fearful that an agreement would not be reached, but on an initial assessment of what has been agreed they are far from impressed. By midday the precious metal was up $35 and looks set to have its most positive trading day for over a month. Yesterday's surprisingly good European car sales figures are continuing to give a boost to both platinum and palladium as both component metals of catalytic converters are up over 1.5% today.

US dollar drops on US debt hangover

Last night's news will see the uncertainty hanging over the US stretched all the way until the start of 2014, and as such the US dollar has dropped over 100 pips against both the euro and sterling. Yesterday’s news that the debt-rating agency Fitch had placed US debt on a negative watch has also helped the perceived value of the dollar fall. Arguably the third piece of this weakening dollar jigsaw is the decreased chances of the Fed starting its tapering of the quantitative easing policy in 2013.

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