LONDON MARKETS: U.K. Stocks Rise For Fifth Straight Day

By Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- The U.K.'s benchmark stock index extended gains into a fifth straight day on Wednesday, as U.S. lawmakers raced to hammer out a last-minute deal to avoid breaching the nation's debt ceiling on Thursday.

The FTSE 100 index gained 0.3% to 6,571.59, adding to a 0.6% gain from Tuesday.

Oil firms helped lift the index, as oil prices moved higher. Shares of Royal Dutch Shell PLC (RDSB) gained 1%, BG Group PLC put on 0.7% and BP PLC (BP) edged 0.3% higher.

Most banks also posted gains, with shares of Barclays PLC up 1.4% and Standard Chartered PLC rising 1.9%.

The broader gains came on hopes U.S. lawmakers would agree on measures to raise debt limit, before the country runs out of borrowing authority in 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.

In afternoon action on Wednesday, the Senate laid out a deal to raise the debt ceiling through Feb. 7 and reopen government until Jan. 15. House Speaker John Boehner will allow a Senate agreement to come to the House floor for a vote "in a very timely way," Texas Republican Rep. Kevin Brady told Bloomberg Television, ahead of the deal.

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, shares of IMI PLC added 1.9% 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 1.3% after Goldman Sachs added the telecom firm to its conviction list and reiterated the buy rating on the stock.

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