Thanks to the strong pound, the FTSE 100 dropped lower on the last trading day, as London’s benchmark index experienced its worst year since the financial crisis of 2008.
As currency pressures and rising case numbers of the coronavirus weighed on sentiment, the index again lagged behind its foreign peers.
At the close on New Year’s Eve, London’s benchmark index closed 95.3 pence, or 1.4 percent, lower at 6,460.52 pence.
This takes its cumulative losses to an annual slump of 14.34 percent for 2020 .
Although the index closed well above its low in March, it remained well below its level in January.
“The FTSE 100 ended the year on the back foot, with the value-driven and cyclical nature of UK markets providing significant underperformance relative to their US counterparts,” said Joshua Mahony, senior market analyst at IG.
This underperformance of UK equities is never more obvious than when, in the same week, the Dow reached record highs that the FTSE 100 could produce its worst annual performance since 2008.’
He added that the losses on Thursday were at the forefront of travel and property stocks, with “concerns about a prolonged period of economic retrenchment adding to clear uncertainty about how bad the UK was.” The economy is going to suffer from leaving the EU.
On Thursday, after the Brexit bill passed Parliament on Wednesday, the pound continued its recent gains against the weak U.S. dollar.
The pound rose 0.25 percent to 1.366 against the U.S. dollar and was 0.5 percent higher at 1.113 against the euro.
Among European stocks, in late trading, the CAC 40 in Paris was down 0.1 percent, while Germany’s Dax was closed for the day.
Across the Atlantic, the Dow Jones and S&P finished the year in muted trade.
In corporate news, the value of Countrywide soared after the troubled property business agreed to an acquisition by rival Connells, valuing the firm at over £ 134 million.
After the announcement of the takeover, which would create a property company with more than 1,200 stores and about 15,800 employees across the UK, shares in Countrywide grew 12.8 percent. The stock closed at 390.6 pence to 44.2 pence.
At the bottom of the FTSE 100, British Airways owner IAG closed before news that the U.K. airline had secured a £ 2 billion loan to help it weather the pandemic.
IAG, which also owns Iberia and Aer Lingus, said that the five-year loan was underwritten by a bank consortium and partly backed by UK Export Finance, which is government-owned (UKEF).
At 159.8 pence at the close, the group’s shares were 7.55 pence lower.
After the London close, oil prices rose marginally, with the price of a barrel of Brent crude oil up 0.06 percent at $51.2.
Avast, up 7.5 pence to 537.5 pence; Natwest, up 2.1 pence to 167.65 pence; Pershing Square, up 30 pence to 2,565 pence; and Croda International, up 60 pence to 6,596 pence, were the main risers in the FTSE 100.
IAG, down 7.55 pence to 159.8 pence, Diageo, down 113 pence to 2,878 pence, DCC, down 182 pence to 5,178 pence, and Johnson Matthey, down 84 pence to 2,425 pence, were the biggest losers in the FTSE 100.