European stock markets ended the last full trading week of 2020 in the red after the previous bullish session saw them hit a ten-month high and Wall Street reach another record close.
Major markets across Europe had a rollercoaster day, dipping slightly at the open before turning positive as the day progressed. However, as the opening bell rang in New York, bourses retreated.
The EU’s chief negotiator Michel Barnier said the UK and the EU have “just a few hours” to work out an agreement which knocked the currency against the euro and the dollar, falling from its two-year high yesterday.
This was a positive for the blue-chip index in the morning thanks to the inverse relationship between sterling denominated share prices and the dollar-based earnings of many of the index’s constituents. But it was short-lived as the FTSE 100 slumped back into negative territory, ending 0.33% lower to 6,529.18 points.
The slump came as retail sales data published on Friday in the UK showed spending declined for the first time in six months in November. The slump coincided with a month long lockdown across England.
Richard Hunter, head of markets at Interactive Investor, said: “The FTSE 100 has not been able to build on the momentum of a strong showing since the beginning of November and remains down by 13% in the year to date.
“The overarching concerns around Brexit and the pandemic continue to cast a shadow on sentiment, while the very nature of the index itself has also stunted progress, with an exposure to the likes of the oil and banking sectors in particular proving a headwind during the course of the year.”
On Wall Street stocks touched fresh record intraday highs on the open before slumping due to little progress on a federal spending deal in Washington. Lawmakers are still negotiating a fresh coronavirus relief package and legislation to fund the government for the fiscal year.
Friday marked the quarterly event of quadruple witching, in which stock index futures and options, and single equity futures and options, all expire, which tends to stir up heightened trading volumes.
The S&P 500 is set to rebalance after market close, adding Tesla (TSLA) to the index as the largest-ever company (by market capitalisation) to join.
Tesla’s inclusion to the bourse on 21 December is expected to trigger a spike in market volatility and a torrent of trading as index-trading funds snap up shares so their portfolios reflect the index.
Asian markets fell overnight. Japan’s Nikkei (^N225) lost 0.2% as the country’s central bank held its interest rate unchanged at -0.1% and launched a review of its monetary policy for the first time in four years.
In China, the Hong Kong Hang Seng (^HSI) dropped 1%, China’s Shanghai Composite (000001.SS) shed 0.3%, and the Shenzen Component (399001.SZ) slid 0.3%. It came as Reuters reported that the US was preparing to blocklist “dozens” of Chinese companies, including the country’s biggest chipmaker SMIC.
In Australia, the ASX 200 (^AXJO) dropped 1.2%.
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