The prospect of further political upheaval in the EU put an end to the FTSE 100’s “Santa rally” in the final trading session before Christmas.
After closing at a new record high of 7604 on Thursday, investors took the index to fresh territory of 7614 in Friday’s shortened session.
But the gains soon melted away as the clock ticked down to 12.30pm – with analysts pointing to thin trading volumes as nerves grew about instability in Spain over regional election results that are expected to see separatists regain power in Catalonia.
:: What has driven FTSE 100 to record highs?
Bank stocks were particularly hard hit as the IBEX in Spain fell as much as 1.2%.
Jasper Lawler, head of research at London Capital Group, said: “Moving headquarters outside of Catalonia didn’t help shares of Banco Sabadell and CaixaBank, they remain very exposed to the region.
“It’s a frustrating result for shareholders invested in Spain to capture the country’s rising economic fortunes.
“Political disruption looks like it will be an ongoing feature of investing in Spain.”
The FTSE 100 joined other European markets in closing slightly lower – down 11 points at 7592 in London – as sentiment shifted away from joy over corporate tax cuts in the US that had dominated on Thursday.
More from Business
There was little to help nudge the FTSE higher as official data showing UK economic growth at 0.4% in the third quarter was confirmed by the Office for National Statistics, as had been expected.
The theory behind a “Santa rally” is that stock values are often traditionally boosted ahead of the festive season by Christmas and annual bonus payments to workers – aided by forecasts of improved returns to come in the following year.