FTSE 100 close: Stress over US debt ceiling talks drag London index as IMF ditches UK recession forecast

London’s FTSE 100 nipped lower today as investors zeroed in on the latest developments in talks between Republicans and Democrats about raising the debt ceiling.

The capital’s premier index slipped 0.1 per cent to 7,762.96 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, dipped 0.34 per cent to 19,208.31 points.

President Joe Biden and top Republican Kevin McCarthy have been butting heads over whether to lift the cap on how much the US can borrow.

Unless an agreement is reached by 1 June, the US Treasury has said the world’s largest economy will be unable to fulfil payments to its creditors.

“If no agreement is reached, the US could default on interest it owes on its debts, sending borrowing costs soaring and sending shockwaves through the global economy. The forecast incoming mild recession would turn into a storm and the US financial credibility would be badly shaken,” Susannah Streeter, head of money and markets at Hargreaves Lansdown, said.

Victoria Scholar, Head of Investment at interactive investor, said: “European markets have opened lower, weighed down by global risk-off sentiment amid concerns about the US debt ceiling.”

In overnight trading, Asia stocks slipped on concerns about the ramifications of a US default on the global economy, weighing on the FTSE 100 during opening exchanges.

Losses on the UK’s top stock index were also not offset by the International Monetary Fund today in fresh projections ditching its recession call and raising 2023 GDP growth to 0.4 per cent from a 0.3 per cent contraction.

Britain’s biggest banks listed on the FTSE 100 led gains in the City. Barclays climbed 2.1 per cent, while Lloyds Bank, the country’s biggest mortgage lender, added 1.38 per cent. NatWest also jumped.

Retailers dragged the premier index, with specialist trainer retailer JD Sports and luxury and Mike Ashley’s Frasers Group both trading at the bottom of the FTSE 100 after shedding 2.77 per cent and 4.21 per cent apiece.

Retailers have been performing pretty well of late due to consumer spending holding up better than feared amid the cost of living crunch.

The pound weakened around 0.12 per cent against the US dollar.

Oil prices rose around 1.5 per cent.