LONDON MARKETS: U.K. Stocks Break Winning Streak; Burberry Slides

By Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- After four days in positive territory, U.K. stocks declined on Wednesday as investors worried the political deadlock in the U.S. could bring the global economy to its knees. Stocks also stayed lower after data showed the U.K. unemployment rate remained unchanged in August as expected.

The FTSE 100 index lost 0.5% to 6,518.28, partly erasing a 0.6% gain from Tuesday.

Miners posted some of the biggest losses in the index. Shares of Fresnillo PLC gave up 2.3%, Anglo American PLC lost 1.9%, Vedanta Resources PLC fell 2%, and BHP Billiton PLC (BHP) slipped 1.1%.

The broader losses came as the U.S. government shutdown moved into Day 16 and as investors worried lawmakers there won't agree on raising the nation's debt ceiling before it runs out of borrowing authority on Thursday. A failure to lift the limit could trigger a technical default for the country, which some fear could in turn ignite a global economic downturn.

Fitch Ratings put its AAA credit rating of the U.S. on negative watch late Tuesday, citing the prolonged congressional negotiations and the political brinkmanship surrounding them.

In the U.K., data showed the unemployment rate held steady at 7.7% in the period from June to August, matching expectations from most analysts. Meanwhile, employment rose to a record high, and jobless claims for September dropped by 41,700 from August, in the latest sign the country's job market is improving.

Joblessness data from the U.K. have risen in prominence after the Bank of England in August said it will not consider a hike in the rate until the unemployment rate drops below 7%.

"The data add to evidence that unemployment is set to fall faster than the Bank of England has anticipated, meaning a hike in interest rates would in theory be justified earlier than 2016, as currently envisaged under the Bank's 'forward guidance,'" said Chris Williamson, chief economist at Markit, in a note.

"The worry is that any hike in interest rates before real incomes start to revive would set the economic recovery back significantly, as rising demand for staff is still not feeding through to higher wages," he added.

Among other notable movers in London, Burberry Group PLC gave up 2.3%, building on a 7.6% loss from Tuesday, when news that Apple Inc. (AAPL) named the luxury-goods firm's Chief Executive Angela Ahrendts as senior vice president of retail and online stores hit the stock.

Shares of IMI PLC added 2.1% on news Marmon Group LLC, the industrial arm of Warren Buffett's Berkshire Hathaway Inc. (BRK/A), has bought the drinks dispensing and merchandising divisions of the British engineering company.

Shares of BT Group PLC rose 0.5% after Goldman Sachs added the telecom firm to its conviction list and reiterated the buy rating on the stock.

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