Financial Markets Nervous Ahead Of Debt Ceiling Vote

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  • FTSE 100 opens lower as concerns continue over inflation and the US debt ceiling vote.
  • Brent crude heads back towards $76 a barrel as uncertainty lingers.
  • Asda makes a further foray into convenience sector but shoppers likely to stay focused on value.
  • ITV share price falls on the open but gains back some losses, as speculation over This Morning continues although investors more focused on wider picture.

FTSE 100 Opens Lower Due To Concerns Over The US Debt Ceiling Vote

A deal may have been struck on the debt ceiling, but it’s not fully calmed nervousness on financial markets. Limits on spending are being imposed just as America looks set to head towards recession, which could make it harder for growth to snap back.

Clamor from dissenting voices on both sides of the political divide are rising, ahead of a crucial Congressional vote later today. Nevertheless, the US does appear to be inching towards Budget agreement, although it’s likely to take a good deal of wrangling this week before it’s passed.

Although the debt ceiling will be lifted for two years, Republicans won some of their demands for limits on federal spending but not enough to assuage some Conservatives on the right of the party. The uncertainty has kept a lid on oil prices, with Brent Crude tripping up following strides it made soon after President Joe Biden and Republican Speaker Kevin McCarthy reached the deal.

The FTSE 100 has opened lower and European bourses also put in a lackluster early performance as investors assess pitfalls ahead for the global economy, with concerns about high inflation still weighing on minds. The gult between price growth in the UK and Eurozone nations appears to be widening, with prices in Britain proving much more stubborn.

The snapshot from the British Retail Consortium showed that shop price inflation increased to 9% in May up from 8.8% in April but the latest reading through from Spain showed that consumer price inflation had dropped to 3.2% in May from 4.1% in April, a sharper fall than expected.

Asda Gobbles More ‘Grocery On The Go’ Sites

Asda’s further foray into the convenience supermarket sector hasn’t knocked the share price of Sainsbury’s (LON:SBRY), Tesco (LON:TSCO) and Marks and Spencer (LON:MKS), which rose in early trading. The Issa brothers, who own the company, intend to gobble up a bigger slice of the grocery on the go market, by acquiring EG Group’s UK and Ireland operations.

The idea is that by being super-competitive on petrol, Asda may win more grocery custom from rivals at a time when grocery top-ups are all the rage, rather than dedicated weekly shops. But while the cost-of-living crisis rages and so many consumers shop frenetically around for the lowest possible price,  the search for value may be prioritized over convenience for the foreseeable future.

ITV Share Price Falls

ITV plc (LON:ITV)’s share price fell back a little in early trading but clawed back some losses as investors seem little perturbed by the speculation surrounding the departure of a key presenter and the future of flagship show ‘This Morning’.

Although the drama has concentrated minds about the need for consistently popular content in important slots which keeps eyes on screen and advertising revenues returning, this is being viewed as a short-term hiccup rather than a longer-term problem for the company.

Instead, there will be a much closer eye trained on advertising prospects over the longer term given high inflation and the worry that a further ratcheting up in interest rates could push the UK into a recession after all, which could lead to marketing budgets being squeezed.’’

Article by Susannah Streeter, head of money and markets, Hargreaves Lansdown