FTSE 100 falls on fears of new Covid virus strain but Brexit talks progress offers hope

The FTSE 100 was set to fall when it opens amid growing concerns about the impact of new Covid-19 restrictions in London and fears of the impact of a new, more virulent strain of the virus.

Shares were expected to drag the leading index down 28 points to 6509 by traders on the IG Index trading platform as traders digested last night’s details about the apparent mutation of the virus thought to be causing the disease’s rapid spread in the South East. CMC Markets traders indicated a 19 point fall.

If those early calls on the FTSE prove correct, they will add to yesterday’s 15 point fall.

The hospitality industry has warned of a flood of new redundancies in the restaurants sector as businesses who had hoped for strong Christmas sales to tide them over the quiet January and February months are forced to close.

While the coronavirus crisis exerts a downward pressure on stocks, multinationals’ shares also face selling pressure from a rise in the pound, which weakens overseas earnings when translated back into the UK currency.

Positive news on the Brexit trade deal talks sent the pound sharply higher yesterday after European negotiators suggested they were inching towards a deal.

Irish foreign minister Simon Coveney suggested an agreement was 90% done, suggesting the majority of calm-headed traders who had always predicted a deal should be proved right.

As CMC Markets’ Michael Hewson put it: “After the year we’ve all had, wouldn’t it be nice if hostilities were suspended on the alter of not inflicting more economic pain on top of the economic pain of coronavirus, and a deal agreed in time for Christmas?” 

Asian shares were slightly more upbeat than western markets appeared to be today thanks to the Chinese economic recovery. Seeing Covid’s second wave spread across the West, the mood was still somewhat dampened today, albeit investors took some comfort from the lack of new cases there.

Chinese retail sales data again gave western investors a glimpse of life post-Covid, with a big improvement continuing. Industrial production was likewise resilient.

The data front in the UK is likely to be less jolly, with unemployment expected to come in at 5.1% in the three months to October,  up from September’s 4.8%.

Chancellor Rishi Sunak has predicted the rate will hit 7.5% in the second quarter of next year. The monthly jobless claims total is already running at 7.3% and the new restrictions brought in during November will only drive that higher.