UK's FTSE falls to 3-month low on U.S. debt concerns
* FTSE at 3-month low as U.S. debt concerns weigh on market
* Morgan Stanley downgrade hits Vedanta
* FTSE to drift lower ahead of U.S debt deadline -APS Alpha
By Sudip Kar-Gupta
LONDON, Oct 9 (Reuters) - Britain's benchmark equity index edged down to a three-month low on Wednesday as a lack of progress in resolving the U.S. budget stalemate hit the stock market.
Although many investors still expect U.S. politicians to reach a deal eventually over the country's budget and debt ceiling, they see little progress for equity markets in October.
"It's all rather bearish in the short-term," said XBZ European equity options broker Mike Turner.
The blue-chip FTSE 100 index edged down by 0.1 percent, or 6.95 points, to 6,358.88 points in late-session trade, to mark its lowest level since early July.
Mining group Vedanta was the hardest-hit FTSE 100 stock, falling 4 percent, which traders attributed to Morgan Stanley's downgrade on the stock to "underweight" from "equal-weight".
In late May, the FTSE 100 raced to a 13-year high of 6,875.62 points, but it has since lost ground due to expectations of less monetary stimulus in future from the U.S. Federal Reserve.
Although the FTSE remains up 8 percent since the start of 2013, it has slipped again in October after the U.S. government had to partially shut down this month due to the ongoing disagreement among politicians over the country's budget.
The U.S. budget standoff has led to concerns about the $16.7 trillion U.S. debt ceiling, which Treasury Secretary Jack Lew has said the government will hit no later than Oct. 17.
Berkeley Futures associate director Richard Griffiths said his firm had sold "put" options due to expire on Oct. 18 on the FTSE 100 with strike prices of 6,200 and 6,250 points, allowing investors to bet on a possible 160 points fall by then.
However, Griffiths said those "put" options had relatively cheap prices, due to the risk that they would be worthless should a U.S. debt deal be reached before then which could lead to a sharp swing higher on global stock markets.
APS Alpha technical strategist Adrian Slack felt the FTSE 100 would drift lower as the U.S debt deadline loomed nearer.
"The closer we get to October 17, the more likely it is that markets will drift lower, until we get there," he said. (Additional reporting by Tricia Wright; Editing by Hugh Lawson)
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