By Barbara Kollmeyer
London stocks fell on Friday, with shares of insurance companies under particular pressure after the U.K. Supreme Court said that businesses must be covered for losses triggered by COVID-19 lockdowns.
The FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX -0.30% fell 0.9% to 6,736.31 and was set to drop around 2% for the week. The pound /zigman2/quotes/210561263/realtime/sampled GBPUSD -0.1528% was equally weak, off 0.5% to $1.3615 as the dollar rose across the board.
The moves lower were in step for losses across global markets, which had rallied ahead of President-elect Joe Biden’s stimulus plan and then were giving up those gains after he announced a $1.9 trillion stimulus package to counteract the effects of the pandemic late on Thursday.
The selloff hit stocks in value-focused areas that tend to gain on hopes for strengthening economies, such as commodity plays. Oil prices, which have also benefited from the rally, fell over 1%, dragging down shares of heavily weighted BP /zigman2/quotes/207305210/composite BP +1.63% /zigman2/quotes/202286639/delayed UK:BP +0.22% and Royal Dutch Shell /zigman2/quotes/205095589/composite RDS.A +1.29% /zigman2/quotes/206428183/delayed UK:RDSA +0.36% , both down more than 1% each.
Mining stocks also dragged down the index, with shares of Rio Tinto /zigman2/quotes/208934945/delayed UK:RIO +0.38% /zigman2/quotes/202627887/composite RIO -0.93% off 3% and Anglo American /zigman2/quotes/201381512/delayed UK:AAL -0.91% down 4.8%.
“Expectations for higher inflation have been driving cyclical stocks such as commodity producers, which is a key reason why the FTSE 100 did so well at the start of 2021 with miners and oil companies leading the way,” said Russ Mould, investment director at AJ Bell, in a note to clients.
U.K. insurers were in the spotlight after the country’s Supreme Court dismissed appeals by insurers against claims brought by businesses through the COVID-19 pandemic and lockdowns. The U.K.’s Financial Conduct Authority had originally brought the suit, representing 370,000 affected policyholders. The Financial Times reported that the ruling could affect 700 types of insurance policies from 60 insurers.
Huw Evans, director general of the Association of British Insurers, said in a statement that his organization welcomed the “clarity that the judgment will bring to a number of complex issues,” and that all “valid” claims will be paid out as soon as possible.”
“The insurance industry expects to pay out over £1.8 billion ($2.5 billion) in COVID-19 related claims across a range of products, including business interruption policies,” said Evans.
Shares of insurers were in the red across the board, with Legal & General /zigman2/quotes/201125471/delayed UK:LGEN -0.61% , Direct Line /zigman2/quotes/201952264/delayed UK:DLG -0.57% and Beazley /zigman2/quotes/209655690/delayed UK:BEZ -0.78% down more than 1% each. Shares of Prudential /zigman2/quotes/200530572/delayed UK:PRU -1.27% fell 0.4%.
One bright spot in London was information-technology company Aveva /zigman2/quotes/202038414/delayed UK:AVV -0.88% , whose shares surged 5.7% after it said revenue growth rose in the first nine months of fiscal 2021 and that it was confident in its full-year outlook.