Markets across Europe were trading lower early on, following on from a weak session in Asia overnight and the fourth straight day of losses for the Dow Jones and S&P 500 indices on Wall Street.

While the ongoing debate over the US debt ceiling continues to grab the market’s attention, Treasury Secretary Jacob Lew said that investor confidence in an eventual deal to raise the limit is probably “greater than it should be”. He said: “People have to take seriously that Congress has a lot of work to do in a short period of time.”

According to Moody’s, a failure by Congress to agree to lift the debt limit would have a worse outcome for financial markets than a government shutdown. The ratings agency said in a report that worries over a default “could roil financial markets and damage business and consumer confidence“.

Recent mixed economic data from the US and conflicting comments by Fed officials over recent days continue to muddy the outlook for the central bank’s stimulus programme. Yesterday it was reported that US consumer confidence dropped to its lowest levels in four months in September, while house prices showed their biggest annual jump in over seven years in July.

“Stocks continue to retreat from the highs of last week as uncertainty over the Fed’s plans and mixed macro data place hurdles in the path of equity market bulls,” said Matt Basi, Head of UK Sales Trading at CMC Markets.

“The orderly nature of the pull-back suggests a sensible breather after what has been another phenomenal run up in the major indices, but the longer it goes on the greater the potential for the correction to gather pace,” he added.

FTSE 100: Carnival extends losses after Q3 disappointment

Cruise operator Carnival was a heavy faller for the second day in a row after the company disappointed with its third-quarter results and guidance for the full year.

Morgan Stanley downgraded its rating on the stock this morning from ‘equalweight’ to ‘underweight’ and cut its full-year earnings per share estimates by 28%. The bank said: “CCL’s early F14 guidance implies a sluggish yield recovery and a step-up in costs, and we think consensus will drift to our level. A major restructuring and/or cash return look unlikely as supports to the stock.”

Supermarket group Tesco was also suffering from a downgrade this morning by JPMorgan Cazenove to ‘underweight’, as the bank said that the company will be the most affected by structural problems in the UK food retailing industry.

Insurance group RSA Insurance was a heavy faller this morning after going ex-dividend, meaning that from today investors won’t have access to its latest payout. Centrica and Old Mutual also went ex-dividend today.

Source: Sharecast