The London Stock Exchange’s blue chip index ended its Christmas rally of 11 straight days of growth by turning red on Monday – the final full day’s trading in 2019.
Analysts and experts predicted the downturn came as investors started cashing in from the boosts, and the market was also impacted by a strengthening pound.
The majority of FTSE 100 companies are internationally focused, with many trading dollars and attracting foreign investment.
But when the pound strengthens, the index tends to fall due to shares appearing more expensive to international traders.
The FTSE 100 closed down 0.8%, or 57.85 points, at 7,587.05 and the pound was up 0.4% at 1.314 dollars. Against the euro, it was also up 0.1% at 1.172.
Fiona Cincotta, financial analyst at CityIndex, said: “With Wall Street starting in the red, a stronger pound and little for traders to grab on to in the sluggish seasonal trading period, profit-taking was the order of the day.
“The pound is faring better than the FTSE in the penultimate day of trading of the year. The pound is on the rise for the sixth straight session, extending gains by 0.4% at the start of the week versus both the euro and the dollar, as thin trading volume enhances action in the FX markets.”
Chris Beauchamp, chief market analyst at IG, added that part of the pound’s strengthening is due to the dollar weakening against several currencies.
He said: “The US dollar is rapidly reaching crunch point against a host of global currencies, with the dollar index hitting its lowest level since mid-July.
“With US data already looking better, and the Fed’s course set for the time being, it is time that the optimism around the global economy was spread around a bit more, and the gains in currencies like the Aussie, the euro and sterling are a reflection of this.”
In company news, the former chief executive of Next, Sir David Jones, died.
Shares closed down 142p to 7,128p – although the fall is more to do with nervous traders waiting anxiously for the retailer’s Christmas trading update on Friday.
Rio Tinto workers returned to a South African titanium and iron mine on Monday, just weeks after the shooting of an employee forced the site to close.
The London-listed mining giant, which owns 74% of the project, invested 463 million dollars (£353 million) in April, but the reopening failed to win over investors, with shares closing down 41.5p at 4,507p.
Elsewhere, engineering firm Smiths Group closed down 1.6%, off 28p at 1,686.5p, following reports in the Sunday Times that chief executive Andy Smith is likely to step down as chief executive once he has spun off the firm’s medical business.
The company denied the claims, but it did not stop investors from getting spooked.
Finally, radio frequency tech business CyanConnode surged 62%, up 1.3p to 3.4p, as bosses confirmed it has secured an order for 33,000 smart metering solutions units in Thailand, a new territory for the firm.
On Tuesday, the stock exchange will close at 12.30pm ahead of the New Year’s Day bank holiday.
On the FTSE 100, the biggest risers were NMC Health, up 80.5p at 1,816.5p; Persimmon, up 38p at 2,688p; Just Eat, up 9.2p at 838.8p; British Land, up 6p at 636p; and Land Securities, up 7.6p at 989p.
The biggest fallers on the FTSE 100 were BAE Systems, down 12.8p at 566.8p; Ferguson, down 148p at 6,886p; Rentokil Initial, down 9.2p at 455.6p; Next, down 142p at 7,128p; and Rolls-Royce, down 13.6p at 687.8p.