Markets: Fresh US fiscal cliff fears arrest rally

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THE FTSE 100 Index abandoned an assault on the 6,000 mark yesterday as news from America suggested it may be too late for the world’s largest economy to avoid its “fiscal cliff”.

The Footsie closed almost flat at 5,954.3 as comments from US Senate leader Harry Reid sent an early rally into reverse. He said time had all but run out for a deal to avoid $600 billion (£370bn) of automatic tax rises and spending cuts in January.

However, many traders were still expecting some sort of resolution to the stand-off. Giles Watts, head of dealing at City Index, said: “We may get a further pullback but the general outlook is still positive. The general expectation is that when push comes to shove, they’ll reach an agreement.”

Miners dominated the blue-chip risers’ board during a session of slim trading volumes, those on the front foot yesterday including Eurasian Natural Resources with a rise of 10.2p to 289.4p.

They were joined on the up by banking stocks, with Royal Bank of Scotland ahead 8p to 325p and Lloyds Banking Group up by a penny at 49.1p, having surged by around 80 per cent over the course of this year.

Household goods firms were under pressure, with Unilever and Reckitt Benckiser down 25p to 2,395p and 51p to 3,895p respectively. Retailers also suffered as early reports on Christmas trading failed to impress. Tesco was down 2.4p at 336p, while Marks & Spencer dropped 0.5p to 388.5p.

Outside the top flight, Greenock-based British Polythene Industries (BPI) was 4.5p higher at 397p. The rise came as a research note predicted the firm would be able to improve its margins after prices of polymer finally eased off after a long period of inflation.

NEW YORK: Wall Street dipped last night but recovered most of the day’s losses just before the close when the House of Representatives said it would work this weekend with the aim of avoiding the “fiscal cliff”.

The Dow Jones industrial average slipped 18.28 points, or 0.14 per cent, to finish at 13,096.31 while the Standard & Poor’s 500 Index fell 1.74 points, or 0.12 per cent, to 1,418.09. The Nasdaq Composite Index shed 4.25 points, or 0.14 per cent, to close at 2,985.91.