UK’s FTSE 100 at two-week low as surprise US credit rating cut sours mood

By Shashwat Chauhan, Rupali Chaudhary and Khushi Singh

(Reuters) -Britain’s FTSE 100 fell over 1% on Wednesday as global risk sentiment took a hit after rating agency Fitch cut the United States’ credit rating, while BAE Systems’ shares jumped after the defence company raised its full-year earnings forecast.

The blue-chip FTSE 100 index dipped 1.4%, touching its lowest level since July 19, while the more domestically-focussed FTSE 250 midcap index shed 1.3%

Fitch on Tuesday downgraded the United States to AA+ from AAA, citing fiscal deterioration over the next three years and repeated down-to-the-wire debt ceiling negotiations that threaten the government’s ability to pay its bills.

“There may be some short term noise in financial markets around U.S. government debt but in the mid to long term it doesn’t necessarily change things globally,” said Richard Flax, the chief investment officer at Moneyfarm, adding other drivers, such as monetary policy will have a bigger impact on markets.

The aerospace and defence sector gained 2.9% touching a record high, as BAE Systems added 6.4% after upgrading its earnings guidance for 2023.

Industrial metal miners slipped 2.6% as prices of most base metals fell on a stronger dollar and concerns over weak manufacturing data from China. [MET/L]

Endeavour Mining tumbled 5.2% after reporting higher net debt. The broader precious metal mining index fell 3.9%.

Financials were the biggest drags on the FTSE 100, with lender HSBC and insurer Prudential Plc, which have exposure to China, down 2.7% and 4.4% respectively.

Markets now awaits the Bank of England’s decision on monetary policy on Thursday, with the consensus leaning towards a 25 basis point hike to fight an inflation rate running at more than four times its target.

Among individual stocks, technology firm ConvaTec Group rose 6.3% after raising its full-year guidance.

Taylor Wimpey gained 2.8% after the homebuilder pledged to build more homes than previously forecast.

(Reporting by Shashwat Chauhan and Rupali Chaudhary in Bengaluru; Editing by Sonia Cheema and Mark Potter)