US debt fears cast shadow on stocks

UK stocks crawled back into the black today as uncertainty over the US debt ceiling continued to cast a shadow over trading.

Appetite for risk remained subdued amid a raft of corporate earnings and economic data showing US and UK economies still struggling to return to growth.

The FTSE 100 closed just 0.08 per cent higher at 5,929.73.

“The concerns about the political wrangling in Washington over the raising of the debt ceiling continue to weigh on sentiment despite earnings announcements coming in thick and fast,” said CMC Markets analyst Michael Hewson.

Firms that delivered positive news helped lift the index, with energy producer BG Group leading the risers after it said massive hikes in oil and gas prices had boosted its profit in the first half of the year.

BG closed 4.3 per cent higher, while Shell also gained 0.8 per cent.

In contrast, BP lost 2.6 per cent after its $5.6bn (£3.4bn) second-quarter profit failed to impress analysts, who had expected $5.95bn.

Vodafone gained 1.8 per cent as investors sought defensive stocks, while Associated British Foods benefited from a JP Morgan Cazenove upgrade, pushing it up one per cent.

Miners ENRC and Anglo American also added 1.3 and 1.2 per cent respectively, among the few miners doing well amid the risk aversion.

But chipmaker ARM Holdings led the fallers down despite positive second-quarter results showing its earnings were ahead of forecasts, after it said sales later in the year may be tough.

Engineer GKN ended three per cent lower while oilfield services provider Wood Group fell two per cent.

And precious metals miner Fresnillo, which saw a boom yesterday from an investor rush to save haven assets gold and silver, closed down 2.1 per cent.

With uncertainty overhanging the US market, stocks failed to make gains despite several good corporate updates and a survey showing consumer confidence rose more than expected.

“We're starting to see the drop in volume associated with the start of the summer holidays, but the state of affairs in foreign lands still has the ability to turn the market on a sixpence,” said IG Index sales trader Will Hedden.

“There is a definite feeling that we cannot have summer until the US debt issue is resolved.