Reuters: Hot Stocks: FTSE drops on Italian, U.S. political jitters

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FTSE drops on Italian, U.S. political jitters Sep 30th 2013, 08:00 Mon Sep 30, 2013 4:00am EDT * FTSE 100 down 0.8 percent * Miners weaken as investors sell cyclical shares * Alpari reckons 6,423 should act as support By Tricia Wright LONDON, Sept 30 (Reuters) - Britain's top share index fell on Monday, pressured by mining stocks, as political jitters in both Italy and the United States dampened investor sentiment. The FTSE 100 was down 52.72 points, or 0.8 percent, at 6,459.94 points by 0738 GMT, with miners off 1.9 percent as risk-averse investors sold out of cyclical shares. In a sign of increased caution, implied volatility on the FTSE 100 jumped 9.9 percent, its biggest percentage rise since late June. "I suppose it's a pretty understandable risk-off reaction ... but then you wonder, does it make any difference to the medium-term economic outlook? Probably not," Peel Hunt equity strategist Ian Williams said. The index, which dropped 0.8 percent on Friday, is on course to shed 2.4 percent in September. It is, however, set to close out the quarter on a high note, up 0.7 percent - its fourth positive quarter in a row - helped by improving data in Europe. Italy's president began talks on Sunday to pull the country out of a new political crisis, attempting to undercut a move by former premier Silvio Berlusconi to bring down the government and force new elections just seven months after the last vote. And a possible shutdown of the U.S. government loomed large, with chances that Republicans and Democrats will strike a deal on funding the government before the fiscal year ends at midnight on Monday looking increasingly slim. "I think the whole Italian situation is actually more pressing, more of an issue. As far as the U.S. goes, people expect something to be sorted out, but the Italian situation could go either way," BTIG strategist Nick Xanders said. "I would be cautious." Technical analysts said the index is looking fragile, after having ploughed through its 50-day moving average, now at 6,545, on Friday. But Alpari analyst Craig Erlam said previous levels of support at 6,423 and 6,409 should stem the index's downward move, below which the 200-day moving average, at 6,397, should kick in and provide strong support. "A break below here could be very significant, with the next major support levels coming around 6,320 and 6,180," he said. (Reporting by Tricia Wright; Editing by Catherine Evans) Link this Share this Digg this Email Reprints

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