The FTSE 100 fell along with global stocks after jumping yesterday, as investors eased off on their rush into risk assets with months of uncertainty still ahead for the global economy.
Drug firm Moderna’s announcement that its vaccine had shown to be almost 95 per cent effective in late-stage trials cheered markets yesterday, sending the FTSE 100 up 1.7 per cent.
But London’s main stock index fell back today, dropping 1.6 per cent to 6,316 points by mid-afternoon.
In Germany, the Dax was down 0.6 per cent and France’s CAC 40 was 0.4 per cent lower. The continent-wide Stoxx 600 was down 0.7 per cent.
US stocks also fell, with lower-than-expected October retail sales data adding to worries. The S&P 500 was down 0.8 per cent.
The promising results from late-stage vaccine trials have boosted market optimism in recent weeks. They have sparked hopes that life could return to normal next year and economies could recover rapidly.
Moderna’s results came a week after Biontech and Pfizer’s vaccine was shown to be around 90 per cent effective.
Reflation trade wears off for FTSE 100
Markets have witnessed a so-called reflation trade. This has seen investors pivot out of fast-growing stocks like the big tech firms into unloved sectors such as industrials and financials, in the hopes that economic growth will boost their fortunes.
In the US, the Dow Jones hit an all-time high but the tech-heavy Nasdaq index lagged behind. The FTSE 100 hit its highest level since June.
However, many analysts are warning that markets still face a tough winter. “The positive response comes despite rising infections in the US and the risk of more lockdowns,” said Danske Bank chief analyst Jens Peter Sorensen.
Worries about the coming months saw some of the stocks that surged yesterday fall. British Airways-owner IAG was among the biggest fallers, as was jet engine-maker Rolls Royce. Financials and energy firms also slipped.
The FTSE 100 was also dragged down by a stronger pound. It was up 0.5 per cent to $1.325 as Brexit talks continued, after the chief UK negotiator said a deal would likely be reached. A stronger pound weighs on the overseas earnings of FTSE firms, however.
In the US, the Dow Jones industrial average fell one per cent. The Nasdaq was less affected, however, as tech firms supported the index.