FTSE 100 hits two-year low on US concerns

The FTSE 100 index closed at its lowest level in two years on Christmas Eve as an attempt by the US treasury secretary to reassure investors mis-fired.

In a half-day session, the blue-chip index closed down 35.18 points, or 0.52%, at 6,685.99, its lowest level since September 2016.

US Treasury Secretary Steve Mnuchin called the heads of the six largest American banks to check if they had enough cash to see them through any market downturn.

The move was an effort to reassure investors about the US government’s partial shutdown over budget spending for a border wall with Mexico and speculation that President Donald Trump is considering firing US Federal Reserve chairman Jay Powell.

Fiona Cincotta, a senior market analyst at City Index, said: “The stand-off between President Trump and Congress over the financing of the Mexican wall seems set to continue into January with the US government unable to pass any laws in the near future. All of the markets are slightly distorted today because of lower than usual volumes and a short trading day.

“Trump’s plan to fire the chair of the Federal Reserve also rattled the market but, despite his intentions, this is unlikely to happen given that he doesn’t have the authority to dismiss the Fed chair. However, the acrimony will no doubt leave a trace on some asset prices as it will mean likely future friction between Trump and the central bank.”

Elsewhere, the pound was 0.1% lower against the US dollar at 1.264 and was down 0.24% versus the euro to 1.109 at the London market close.

In corporate news, Rolls-Royce shares came under pressure after budget airline Norwegian said it had reached a settlement with the group over technical issues with its Trent 1000 engines.

In an end-of-year update, Norwegian said it has “reached an agreement” with Rolls which will have a positive effect on the airline’s finances from the first quarter of 2019.

Rolls-Royce shares closed down 9p at 801p.

Royal Bank of Scotland has applied for a German banking licence to help retain access to clients in the European Union after Britain departs the bloc.

The state-owned bank is to upgrade its current branch in Frankfurt with a new licensed unit.

RBS shares fell 2.7p to 206p.

Under-pressure Gama Aviation secured two contracts for special mission aircraft worth up to £115.5 million.

The aviation services group said the first was an 11-year deal to provide maintenance and spare parts for eight Government special mission aircraft.

Gama Aviation shares rose 8.5p to 125p.

Germany’s DAX was up 0.21% and France’s CAC 40 declined 1.54%.

A barrel of Brent crude, the international benchmark, was trading down 0.12% at 53.65 US dollars (£42.43).

The biggest risers on the FTSE 100 were Spirax-Sarco Engineering up 170p to 6,070p, Micro Focus up 35p to 1,380.5p, Ashtead Group up 41.5p to 1,643p, and Hikma Pharmaceuticals up 31.5p to 1,697.5p.

The biggest fallers on the FTSE 100 were United Utilities, down 37.8p to 731.4p, 3i Group, down 33.4p at 756.2p, London Stock Exchange Group, down 159p to 3,908p, and Sage Group, down 21.2p at 567p.