Stocks on both sides of the Atlantic stumbled at the start of the week, retreating after big gains in the first few days of trading in the New Year.
The FTSE 100 and the Dow Jones Industrial Average had reached euphoric levels last week thanks to a deadline day deal in the US to avoid the so-called ‘fiscal cliff’ – a series of automatic tax increases and spending cuts worth US$600bn.
The agreement however only extends the deadline by two months, so Barack Obama and co still have limited time to find a longer-term solution to the budget crisis.
Some analysts suggest that going over the ‘cliff’ could be catastrophic for the world’s largest economy and threatens to push it back into recession.
The UK’s blue chip chart dipped 23 points or 0.4% to 6,067, led lower by utility companies.
National Grid (LON:NG.) found itself at the bottom of the FTSE 100, as well as Deutsche Bank’s verdict on the sector, tumbling 2.3%.
The broker suggested that there is worse to come for the utilities sector and investors headed for the hills on the advice, also shedding shares in British Gas owner Centrica (LON:CNA), down 2%, United Utilities (LON:UU.) and Severn Trent (LON:SVT), which both lost 1.4%.
Commodities stocks also dipped, with Randgold Resources (LON:RRS) losing 1.9% and Antofagasta (LON:ANTO) down 1.3%.
Banking stocks stopped the rot, boosted by the news that lenders will be given greater flexibility and time to comply with new regulations regarding liquidity.
Lloyds (LON:LLOY) and HSBC (LON:HSBA) also made small gains on the news.
Supermarket chain Morrisons (LON:MRW) meanwhile held firm despite weak sales over the festive season.
On the mid cap index, Bumi (LON:BUMI) rose 3.7% after the Indonesian coal mining soap opera took another twist.
The company, which was formed by controversial financier Nat Rothschild and the Bakrie family, has been subject to investigations into financial irregularities and a director dispute among other things.
Today shares lifted after it was revealed Rothschild demanded Sir Julian Hornsmith, one of Bumi’s senior directors, either up the ante regarding the response to the alleged dodgy deals or prepare to get the boot.
As for the minnows, North River Resources’ (LON:NRRP) shares shot up 70% as it resumed trading this morning on AIM.
Trading in the stock had been suspended while the company was without a nominated advisor, but it has now resumed following the re-appointment of Strand Hanson last week.
Shares in DiamondCorp (LON:DCP) sparkled 5% higher after it formally agreed the terms of a US$6mln loan from a subsidiary of Tiffany & Co.
In exchange, the upmarket jeweller has secured an off-take agreement for production from the Lace Mine in South Africa’s Free State.
The terms of loan are unchanged from those outlined when the deal with the upmarket jeweller was first unveiled last November.
Fastnet Oil & Gas (LON:FAST) raced up 12% after it was tipped for big things in 2013 by a number of sources as they tested their crystal ball-gazing skills.
Leni Gas & Oil (LON:LGO) also climbed 12% a few days after it was revealed it would take Mediterranean Oil & Gas (LON:MOG) to court due to a disagreement over an offshore block in Malta that Leni sold to the latter.
Mediterranean went on to farm out the block to Genel Energy (LON:GENL).
Ferrex (LON:FRX) soared 12% after it said a scoping study update has significantly boosted the economics of its Malelane iron ore project in South Africa.
Particularly impressive numbers included the net present value (NPV), which has been increased by 65% to US$523mln, while the internal rate of return (IRR) has been raised by 44% to 72%.
Ferrex said the enhanced economics were primarily a result of improved fines recovery that it has been investigating for the last six months.
Tracking them north were new low-cost African airline Fastjet (LON:FJET), up 11%, Oxford Pharmascience (LON:OXP), and Amara Mining (LON:AMA), which rose 8% after two of its directors bought shares in the gold miner.
US Markets
US stocks went the same way, with the Dow Jones Industrial Average and S&P 500 both falling just under half a per cent.
The decline comes ahead of the corporate earnings season, which kicks off tomorrow.
Like the UK’s indices, the S&P 500 chart hit record highs on Friday, reaching levels not since in five years.
The index lost 0.4% to 1,461, while the Dow lost the same to stand at 13,382.
Tech giant Yahoo! (NASDAQ:YHOO) lost 2.8% after a downgrade to ‘market perform’ rom ‘outperform’ by broker Sanford C Bernstein.
Apple (NASDAQ:AAPL), the world’s largest company by market worth, lost 1% after Barclays analysts slashed their target price from US$800 a share to US$740 each.
Online shopping giant Amazon (NASDAQ:AMZN) meanwhile leapt 3.8% after Morgan Stanley took a more positive stance on the stock.