Blue-chips fall on 'fiscal cliff' worries

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There was little in the way of festive cheer in the market today.

Londons blue-chips provided little in the way of festive cheer on what was the last full day of share-dealing before Christmas.

Traders unlucky enough not to have abandoned the Square Mile for their holidays took fright after political negotiations over the US “fiscal cliff” - spending cuts and tax increases due to be implemented in the New Year - took a turn for the worse. The FTSE 100 fell as low as 5,894.10 before recovering some ground and closing down 18.35 at 5,939.99. The mid-cap FTSE 250 (FTSE: ^FTMC - news) was also on the backfoot and lost 60.39 to 12,362.38.

“So cliff clock continues to tick and a deal before the Christmas break is now looking increasingly unlikely,” said Deutsche Bank (Xetra: 514000 - news) strategist Jim Reid.

Among the blue-chips, Carnival (LSE: CCL.L - news) bucked the wider market trend and rose 51p to £24.42, following a drop of 154p a day earlier on the release of its full-year results, which contained a muted outlook for 2013. Numis was positive on the cruise company, arguing “the fundamental outlook for Carnival and the cruise industry remains strong and short-term weakness in the shares presents an attractive opportunity”.

Miner Eurasian Natural Resources Corporation was also under pressure after heavyweight broker Goldman Sachs (NYSE: GS-PB - news) cut its rating to “neutral” from “buy”. The bank said worries about ENRC’s debt covenants had weighed on the shares, and reckoned the stock “may trade sideways” until market confidence in the group returns. ENRC shed 3.9 to 276.9p.

Steel producer Evraz was the heaviest blue-chip faller, dropping 9.2 to 257.8p, as the market digested news of peer ArcelorMittal’s $4.3bn (£2.7bn) writedown because of falling demand for the metal.

Lower down the scale, Central Asia-focused oil and gas exploration company Tethys Petroleum had an early Christmas gift for investors. The group unveiled a farm-out agreement in Tajikistan with Total (NYSE: TOT - news) and China National Petroleum Corporation that means Tethys will receive about $60m in cash to refund what it had already spent on the Bokhtar project. Its shares rose 8¼ to 34½p.