London's blue-chip share index suffered further falls in spite of a rally among housebuilders' and property-related stocks amid hopes of a British housing boom .
A bullish note from US investment bank Goldman Sachs sparked share gains for developers, mortgage firms and DIY groups after it upgraded firms on the back of the Government's Help to Buy scheme and recent encouraging economic data.
Charles Church builder Persimmon rose 5%, bucking falls in the wider FTSE-100 Index, which closed down another 27.9 points to 6337.9 due to ongoing concerns over a US debt default.
Barack Obama spooked markets on Tuesday night by insisting there were "no magic bullets" to solve the political deadlock on Capitol Hill.
Anxious investors fear the impasse between the White House and Congress will not be resolved before the deadline to extend the country's borrowing limit on October 17, putting the world's biggest economy at risk.
Plans for the appointment of Janet Yellen as Federal Reserve chair offered limited relief to the markets as she is seen as a supporter of current US stimulus measures.
However the FTSE-100 is already at a three-month low and was not helped by disappointing UK manufacturing sector data.
The pound fell sharply against the US dollar after overall industrial production fell 1.1% in its biggest monthly decline for nearly a year.
Sterling dropped nearly 1% to 1.59 dollars and 0.4% to 1.18 euros.
The upbeat mood in the housing market meant Persimmon rose 54p to 1131p, while in the FTSE 250 Index, Bellway added 50p to 1320p, Barratt Developments rose 1.1p to 320p and Taylor Wimpey gained 5.1p to 103.8p.
Other beneficiaries from the house market optimism included mortgage lender Lloyds Banking Group, which rose 0.4p to 72.9p and B&Q owner Kingfisher after a gain of 3.6p to 364.8p.
Wickes owner Travis Perkins was 8p higher at 1586p, while estate agency business Countrywide improved 10p to 550p in the second tier.
In corporate news, struggling bakery chain Greggs was lifted by a trading update showing a major revamp had helped stem a fall in sales, with the like-for-like decline narrowing to 0.5% in the third quarter.
Shares in the FTSE-250-listed company were up 3%, or 11.1p, to 438.4p.
Elsewhere in the second tier, catalogue and online fashion firm N Brown fell 5% despite unveiling pre-tax profits up 7.1% to £45 million. Shares fell 26.5p to 489p.
The biggest FTSE 100 risers were Persimmon up 54p to 1131p, William Hill ahead 5.5p to 402.5p, Intercontinental Hotels 22p higher at 1785p and SSE up 16p to 1454p.
The biggest FTSE 100 fallers were Vedanta Resources down 50p to 1020p, ARM Holdings off 32p to 945.5p, Randgold Resources 125p lower at 4295p and ITV 4.7p weaker at 178.9p.
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