FTSE lower as US debt ceiling talks weigh on sentiment. Photo:Andrew Harnik/AP

The FTSE 100 and European stocks opened lower amid nervousness over the US debt ceiling talks.

The FTSE 100 (^FTSE) lost 0.28% to 7,729 points at the open, while the CAC 40 (^FCHI) in Paris slipped 0.32% to 7,382 points. In Germany, the DAX (^GDAXI) fell 0.10% to 15,884.

US president Joe Biden said he is "optimistic" about securing a deal to avert a potentially catastrophic debt default, after he held talks with Republican leaders.

House speaker Kevin McCarthy, however, said much work remained in negotiations to raise the federal borrowing limit and avert a default, with the deadline for agreement just days away.

"Risk sentiment remains poor as the US couldn't reach an agreement on its debt ceiling... Yesterday, both equities and bonds were sold off on US debt ceiling impasse, while the US dollar index remained capped at two-week highs," said Swissquote Bank's Ipek Ozkardeskaya.

FTSE

The FTSE 100 fell back in early exchanges as US debt ceiling talks stalled sparking fears of a US default.

In London, companies reporting results today have included JD Sports Fashion, British Land and the Tesla backer Scottish Mortgage Investment Trust.

JD Sports Fashion (JD.L)shares have opened 2.50% lower, despite the sportswear chain racking up over £10bn ($12.42bn) of sales and adjusted full-year profits of £991m. The company is also reassured by current trading and expects a surplus in the current financial year above £1bn, but shares still fell 2.7p to 167.55p.

British Land (BLND.L)said the value of its portfolio fell by around 12% to £8.9bn in the year through March. Valuations have been hit by rising interest rates, which have pushed up yields on other assets, meaning investors in turn demand higher returns to justify the risk of investing in property. Shares tumbled over 4%.

After British Land wrote off £1.5bn from its real estate portfolio, Edison Group director of research Neil Shah said: "British Land's results indicate some headwinds faced by the property sector, largely driven by higher interest rates and broader economic concerns.



"It's clear that the aggressive interest rate environment and macroeconomic challenges have stifled a tentative recovery from pandemic lows."

Shares in London Stock Exchange Group (LSEG.L) fell 4.65% as a consortium including Thomson Reuters and Blackrock looked to sell a further £2.7bn stake in the bourse operator via a placing at 8,050p per share, below the current share price of 8,112p.

Also, a Special Purpose Acquisition Group (SPAC) has listed on the London Stock Exchange after raising $550m.

Admiral Acquisition Group aims to buy a private company in order to allow them to list on the London Stock Exchange.

The performance of Scottish Mortgage (SMT.L) has continued to slump, with SMT reporting a decline in NAV of 17.8% and a share price fall of 33.5%, while the FTSE All-World index was down 0.9%.

US and Asia

Across the pond, S&P 500 futures (ES=F), Dow futures (YM=F) and Nasdaq futures (NQ=F) were all in the green as trading began in Europe.

US stocks ended the session lower on Tuesday as investors digested fresh economic data and monitored any updates over the debt-ceiling standoff.

The Dow Jones (^DJI) lost 1.01% to close at 33,012 points. The S&P 500 (^GSPC) slipped 0.64% to 4,109 points and the tech-heavy NASDAQ (^IXIC) retreated 0.18% to 12,343.

President Joe Biden and Republican leaders have expressed cautious optimism that a deal to raise the US debt ceiling is within reach, following emergency talks at the White House.

Biden said Tuesday's hour-long Oval Office meeting was "good, productive", sounding upbeat about the prospects of an agreement. House of Representatives speaker Kevin McCarthy said afterwards he believed a deal was possible by the end of this week.

Mickey Levy, chief economist for Americas and Asia at Berenberg, said the probability of default on government debt service remains "exceedingly low."

However, things could "get messy if the political skirmishing drags out, and there are risks of temporary delays in government payments of select obligations and/or a partial government shutdown that would affect some basic activities."

Investors were also processing the latest economic data, which showed that retail sales rose 0.4% in April, representing only half of the growth that Wall Street had expected.

Federal Reserve Bank of Cleveland President Loretta Mester said on Tuesday she doesn't believes that the US central bank is at a point yet where it can hold interest rates steady for a period of time, given how stubborn inflation is.

In Asia, markets were mixed as investors digested economic data from the region.

Tokyo’s Nikkei 225 (^N225) gained 0.84% to 30,093 points, while the Hang Seng (^HSI) in Hong Kong lost 1.07% to 19,764. The Shanghai Composite (000001.SS) slipped 0.22% to 3,283 points.

It is the first time since September 2021 that the Nikkei traded above 30,000.

The index has been rallying and is up 15% this year as foreign investors piled in amid reports billionaire investor Warren Buffett was considering more investment in Japanese stocks.

Pound

The pound (GBPUSD=X) slipped against the dollar, with sterling trading at $1.2460. The sterling (GBPEUR=X) also lost ground against the euro and is now trading at €1.1475.

Oil markets

Meanwhile, Brent crude (BZ=F) slipped yet again and was trading at around $74/barrel as weaker-than-expected economic data in China and the United States offset a forecast of higher global demand from the International Energy Agency (IEA).

Persisting concerns over “muted industrial activity and higher interest rates ... combined have led to recessionary scenarios gaining traction and worries of a downward shift in the oil demand growth,” the IEA said in its latest monthly Oil Market Report.

Watch: Biden, McCarthy Voice Cautious Optimism on Debt Deal

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