Thursday 26 November 2020 4:05 pm

FTSE 100 declines after Tier 2 announcements and dismal economic data from Sunak

The FTSE 100 slipped as investors digested the dire economic outlook offered by chancellor Rishi Sunak yesterday and the new Tier 2 restrictions for London, putting an end to the recent vaccine-driven rally.

London’s main stock index fell 0.46 per cent, taking it down to 6,361 points. It followed a fall of around 0.6 per cent yesterday.

Read more: UK borrowing to hit record £394bn as economy shrinks 11.3 per cent

The domestic-focussed FTSE 250 is also down, falling 0.83 per cent to 19,406.

Chancellor Rishi Sunak yesterday laid out brutal economic data. He said the UK economy is likely to shrink 11.3 per cent in 2020, its worst collapse in 300 years. Around 2.6m people are expected to be out of work next year as unemployment hits 7.5 per cent.

Meanwhile, the US Labor Department reported that the number of Americans filing for the first time for unemployment benefits grew again last week.

Global coronavirus cases yesterday topped 60m. They are still rising in the US, and countries in Europe have imposed economically damaging lockdowns to try to curb the spread, worrying investors.

However, these short-term economic fears have been trumped in recent weeks by positive vaccine announcements. Signs that US President Donald Trump is slowly accepting his election loss have also cheered investors.

FTSE 100 falls on ‘subdued’ day of trading

US stock markets are closed today for Thanksgiving. In Europe, Germany’s Dax rose 0.1 per cent while the continent-wide Stoxx 600 also climbed 0.1 per cent.

“Overall, the volume in the market is expected to remain subdued as traders will be enjoying their Thanksgiving,” said Naeem Aslam of Avatrade.

Hussein Sayed, chief market strategist at FXTM, said: “The global rally seems to have paused for now, following a modest decline of 173 points in the Dow Jones Industrial Average and 0.16 per cent retreat in the S&P 500 [yesterday]. 

Read more: Wall Street hits record high on vaccine hopes and Biden transition

“The fall was driven by the sectors which have benefited the most from the vaccine news, such as energy, basic materials, industrials and financials.” Such sectors also slipped on the FTSE 100 today.

The US dollar slipped 0.1 per cent against a basket of other currencies. The pound was also down 0.37 per cent to $1.333 amid worries about the UK economy.