Afternoon comment courtesy of Spreadex

The FTSE 100 has hit fresh 3-month lows during today’s session after the British Retail Consortium indicated that British retail sales growth has slowed for the second consecutive month in September. Retailers as a result are noticeably weak today with Marks and Spencer losing the most value amongst FTSE 100 constituents shedding over 3 percent by 13:00 BST. Additionally, mining shares are weighing on the headline index, hit by slowing service sector growth in top metals consumer China. 

Broader sentiment has also been dented by the continued U.S. political deadlock, with the second week of government shutdown raising concerns a compromise may not be reached before an October 17^th deadline for raising the country’s debt ceiling. Markets picked up temporarily yesterday afternoon after President Obama gave a glimmer of hope to investors by making clear that he would accept a short-term hike in the U.S borrowing authority. 

Meanwhile, U.S futures have fluctuated between gains and losses as investors weigh up the impact of the government shutdown. The Treasury has made moves to reassure market participants by assuring that all measures to avoid exceeding the borrowing limit by October 17th will be exhausted. As the government shutdown that began a week ago delays the publication of some economic data, investors will turn their attention to companies’ financial results. 

U.S foreign creditors have moved to raise pressure on the U.S to resolve the political impasse on its debt ceiling. China and Japan between them hold more than $2.4 trillion in U.S treasuries and are considering the possible impact of any default on its bond holdings. Any failure by the U.S. to honour its debt obligations would damage the dollar’s status as the world’s reserve currency. A shift in asset allocation by China, Japan or other major holders of Treasuries could also possibly push up U.S. interest rates