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FTSE 100 slips ahead of London lockdown as job losses mount

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FTSE 100 slips ahead of London lockdown as job losses mount
The UK's financial sector is braced for a new lockdown in London

The FTSE 100 slipped into the red as London prepared itself for a new lockdown and job losses climbed, with the index bucking the trend of European and US markets which rose amid positivity about coronavirus vaccines.

London’s biggest index was down 0.5 per cent in afternoon trading to 6,501 points. The FTSE 250 was 0.3 per cent lower.

But in the US, stocks bucked a four-day losing streak and rose at the open. Investors cheered the start of the vaccine rollout in the US, and news that regulators are close to approving the Moderna jab.

European stocks also climbed on the back of vaccine optimism. Germany’s Dax was up 0.8 per cent and the French CAC 40 was 0.1 per cent higher.

FTSE 100 lags global markets

However, the FTSE 100 was the laggard after the government said London – a major financial hub of more than 8m people – would go into the strictest tier of the country’s lockdown system.

Data out this morning showed that redundancies hit a record high of 370,000 in the latest quarter, pushing the UK’s unemployment rate up to 4.9 per cent.

A rising pound also dragged on the FTSE, weighing on the overseas earnings of the index’s constituents. Sterling was up 0.3 per cent at $1.337 by mid-afternoon, with mild optimism about Brexit talks helping the currency.

The slippage in UK shares was relatively widespread. Property group Rightmove led the fallers, with jet-engine maker Rolls Royce and supermarket Ocado also in the top five.

Retailer Next and drinks-maker Diageo were also among the biggest fallers.

“Hope of a potential breakthrough in Brexit talks continues to lift the pound today, with the recovery in sterling hindering the internationally-focused FTSE 100 index,” said Joshua Mahony, market analyst at IG. 

“With London on the cusp of a more stringent, Tier 3 lockdown, the economic picture in the UK is worsening for a month that has typically been dominated by huge consumer spending.”

US stocks climb on vaccine hopes

In the US, the S&P 500 climbed 0.6 per cent while the tech-heavy Nasdaq rose 0.8 per cent.

As well as vaccines, investors reacted positively to signs of progress in stimulus talks.

Yesterday, senior senate democrat Dick Durbin said Congress should vote for a bipartisan stimulus plan worth around $908bn (£680bn).

Vaccine and stimulus positivity also lifted European markets. It failed to budge the FTSE 100, however, with Brexit and new Covid restrictions hanging over the UK economy.

In Europe, analysts were also wary of new restrictions. Germany is set for a new lockdown from Wednesday, and Italy could go under partial lockdown from 24 December.