WEDNESDAY’S MARKET REPORT: US budget deal stokes tapering fears

A provisional budget deal in Washington raised concerns that a reduction in United States stimulus could begin as early as next week, sending shares lower in London today.

The FTSE 100 dipped by 15.59 points to 6,507.72 as mining stocks – which are especially sensitive to demand for raw materials and the outlook for the world’s largest economy – dragged the index lower.

Alastair McCaig, market analyst at IG, said: “The FTSE started the day drifting aimlessly, but the start of US trading gave the index direction, dragging it lower. By mid-afternoon the FTSE was some 130 points off its starting point at the beginning of December, and looks to have its work cut out if it is to maintain its ten-year track record of positive Decembers.”

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Mining stocks were hurt by the uncertainty over whether next week’s US Federal Reserve meeting will see it start to ease back on the country’s multi-billion dollar monthly programme of quantitative easing.

Randgold was 90p lower at 4,051p, while Anglo American fell 22.5p to 1,293.5p.

Yet the Capitol Hill budget agreement did help some London-listed stocks with US government defence contracts – notably BAE Systems, which climbed more than 2 per cent, or 10.6p to 426p, and Rolls-Royce, up 12p to 1,204p. On the FTSE 250 index, Chemring rose 3.2p to 209.6p.

FTSE Group, which organises the share indices, confirmed that Ashtead and Royal Mail will replace Croda International and Vedanta Resources in the FTSE 100 index during the reshuffle on 20 December.

John Menzies, the Edinburgh-based newspaper distributor and aviation services firm, is also being demoted out of the FTSE 250 index.