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(Alliance News) - Stocks in London ended lower on Friday as the UK grapples with rises coronavirus cases and spiralling government debt, while the travel sector was hit by concerns over border closures.
The UK's public sector debt to GDP ratio in December was at elevated levels last seen in the 1960s, the Office for National Statistics said.
Public sector net borrowing, excluding public sector banks, was estimated to have been GBP34.1 billion in December, up by GBP28.2 billion compared to a year ago. This marks both the highest December borrowing and the third-highest borrowing in any month since monthly records began in 1993.
Borrowing in the first nine months of the financial year - being April to December - was estimated to have been GBP270.8 billion, a sharp GBP212.7 billion higher than the same period a year ago and the highest public sector borrowing in any April-December period since records began.
The FTSE 100 index closed down 20.35 points or 0.3%, at 6,695.07 - closing the week 1.6% lower.
The FTSE 250 ended down 196.81 points, or 1.0%, at 20,596.91, falling 0.9% since the start of the week. The AIM All-Share closed down 2.78 points, or 0.2%, at 1,195.31, and finished the week 0.9% higher.
The Cboe UK 100 ended down 0.6% at 665.07, the Cboe UK 250 closed down 1.0% at 17,968.53, and the Cboe Small Companies ended down 1.0% at 12,245.94.
In Paris the CAC 40 ended down 0.6%, while the DAX 30 in Frankfurt ended 0.2% lower.
UK Environment Secretary George Eustice said a full border closure to all visitors from abroad has been considered, adding that there "is concern at the moment about the number of mutant strains".
He said the nation will be "getting back to life closer to normal" in the summer, telling ITV's Good Morning Britain: "It may not be back to normal, but we will be by then, let's hope, out of the lockdown."
On the continent, EU leaders on Thursday "strongly discouraged" Europeans from non-essential travel and warned tougher restrictions on trips could come within days if efforts to curb the coronavirus fell short.
EU chiefs Ursula von der Leyen and Charles Michel issued the warning after a four-hour summit by video link with the heads of government of the 27-nation bloc focused on responding to the second wave of the pandemic.
In the FTSE 100, British Airways parent International Consolidated Airlines ended the worst performer, down 3.4% amid travel-related concerns. In the FTSE 250, Anglo-German travel operator Tui was the worst performer, down 17%. Budget airline easyJet ended down 3.3%, while Irish carrier Ryanair ended down 2.7%.
"Equity benchmarks finished lower as fears of stricter or extended lockdowns are dictating sentiment. It is a broad based sell off, as fears that England's lockdown might last until summer has impacted most sectors. There are concerns the EU might shut internal borders and there has been chatter the bloc might ban travellers from the UK," said CMC Markets analyst David Madden.
"Even though none of these measures have been confirmed, the very mention of them has soured sentiment in equities. Judging by the mood in relation to restrictions, we are more likely to see further constraints imposed rather than an unwinding of conditions in the near term," Madden added.
Fashion retailer Next and Primark owner AB Foods closed down 3.0% and 2.8% respectively, amid more doom and gloom in the UK retail sector as non-essential stores remain shuttered due to lockdown restrictions.
UK retail sales increased 0.3% month-on-month in December - rebounding from a 4.1% slide in November - which resulted in an increase of 2.7% when compared with February's pre-pandemic level. Market consensus, according to FXStreet, had pencilled in a 1.2% increase.
In 2020 as a whole, UK retail sales fell an estimated 1.9% when compared with 2019, the largest year-on-year fall since records began in 1997, the Office for National Statistics said.
The dire performance came after Next late Thursday opted against coming to the rescue of Philip Green's failed Arcadia retail empire.
The pound was quoted at USD1.3665 at the London equities close, sharply lower from USD1.3732 at close Thursday, following disappointing UK purchasing managers' index readings from IHS Markit.
Sterling was retreating from near three-year highs reached against the greenback earlier this week amid a rise in UK coronavirus cases and fears the national lockdown could be extended.
The composite purchasing managers' index tumbled to an eight-month low of 40.6 in January from 50.4 in December. Any reading above 50 indicates expansion and one below, contraction - signalling growth went into reverse in January after just meagre expansion in December.
Worst hit by the latest restrictions was the UK's key service sector, recording a PMI of just 38.8 from December's 49.4. The manufacturing industry fared slightly better, remaining in growth territory in January with a PMI of 52.9, down from 57.5 in December.
Both the services and manufacturing readings severely undershot forecasts. Consensus, according to FXStreet, had seen a services PMI of 45.0 for January and a manufacturing reading of 54.0.
ThinkMarkets analyst Fawad Razaqzada said: "Concerns over a full UK boarder closure and with Covid deaths hitting new records on a daily basis, investors in the pound had little choice but to take profit after the currency's recent run of good form.
"However, the downside could be limited as a no-deal Brexit has been avoided and with the UK being ahead of many countries in rolling out the vaccines, the economy could re-open quicker and growth could rebound as confidence slowly returns. This might not happen until at least the start of the second quarter, but the markets being forward-looking, the latest dip in the pound could be bought."
The euro stood at USD1.2175 at the European equities close, up from USD1.2151 a day before, after the European Central Bank kept monetary policy unchanged on Thursday.
Analysts at ActivTrades said: "The euro is gaining ground on other major currencies during Friday's trading session. The single currency found support after yesterday's ECB monetary policy committee meeting during which ECB president, Christine Lagarde, stated that the current asset purchase program - totalling EUR1.85 trillion - remains flexible, meaning it may not all be used, or it could increase should circumstances require it to.
"Lagarde managed to navigate the press conference without triggering any alarm bells, with the flexible yet measured stance of the central bank maintaining the confidence of the markets in the prospects of the single currency, despite the pandemic and a looming double-dip recession triggered by the resurgence of the virus in the eurozone."
Against the yen, the dollar was trading at JPY103.80, up from JPY103.53 late Thursday.
Stocks in New York were retreating from record-setting levels following disappointing earnings reports from IBM and Intel, and as investors digested a spate of executive orders from US President Joe Biden.
The DJIA was down 0.6%, the S&P 500 index down 0.3% and the Nasdaq Composite down 0.2%.
Dow member IBM plunged more than 10% as it reported another drop in quarterly revenue, while fellow blue-chip Intel shed 5.9% despite reporting better-than-expected results as the chipmaker faces calls to outsource its manufacturing operations.
Investors have been encouraged by Biden's efforts to improve the coronavirus vaccine rollout and his call for Congress to enact an aggressive USD1.9 trillion stimulus package.
At the same time, there have been concerns at Republican criticism that Biden's economic package is excessive during a time of economic uncertainty.
Brent oil was quoted at USD55.55 a barrel at the equities close, down from USD56.05 at the close Thursday.
Gold was quoted at USD1,853.00 an ounce at the London equities close, lower against USD1,864.60 late Thursday.
The economic events calendar on Monday sees the World Economic Forum's Davos Agenda get underway virtually, with keynote speakers including China President Xi Jinping and Bank of England Governor Andrew Bailey.
The UK corporate calendar on Monday has annual results from recruiter SThree.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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