London close: Stocks end lower as millions more enter Tier 4

London stocks reversed earlier small gains to end lower on Wednesday despite news that AstraZeneca’s Covid-19 vaccine has been given the green light and MPs’ passing of the Brexit deal, as millions more people in England were set to enter tougher Tier 4 restrictions.

The FTSE 100 closed down 0.7% at 6,555.82, having hit its highest level since March in the previous session as investors cheered the Brexit deal and US stimulus package. The index was also likely being hit by a stronger pound, which rose 0.7% against the dollar to 1.3599

The legislation, which is being rushed through parliament with little scrutiny in order to become law before the end of the year, was passed by 521 votes to 73 in the House of Commons. It is now being voted on in the upper chamber, the House of Lords before it receives Royal Assent - expected shortly before midnight.

IG market analyst Joshua Mahony said: "UK stocks are on the back foot despite the passing of the Brexit Bill, putting to bed fears of a no-deal Brexit when the UK leaves the EU on Thursday night. Unfortunately it appears to be the case of a buy-the-rumour, sell-the-fact scenario. Despite allaying fears of a no-deal scenario, we are instead facing up to the fact that the UK is facing months of economic instability.

"With the government shifting a further 20 million people into Tier 4 tomorrow, 78% of the country will be operating under restrictions that severely hinder economic activity. With a record 53,000 new cases yesterday, the UK remains on a sharp upward trajectory with no sign of turning the corner. The fear is that without a swift reversal in cases, there is a strong chance that the government either lengthens or tightens restrictions further."

Investors were also digesting the latest data from Nationwide, which showed that UK house prices rose to a six-year high at the end of 2020.

Annual house price growth hit 7.3% in December, up from 6.5% in the previous month. On the month, meanwhile, price rose by 0.8% following a 0.9% increase in November. House prices ended the year 5.3% above the level prevailing in March, when the pandemic hit the UK.

Robert Gardner, Nationwide's chief economist, said: "The resilience seen in recent quarters seemed unlikely at the start of the pandemic. Indeed, housing market activity almost ground to a complete halt during the first lockdown as the wider economy shrank by an unprecedented 26%.

"But, since then, housing demand has been buoyed by a raft of policy measures and changing preferences in the wake of the pandemic. The furlough and Self Employment Income Support schemes provided vital support for the labour market, while a host of measures helped to keep down the cost of borrowing and keep the supply of credit flowing. The stamp duty holiday also stimulated housing demand, by bringing forward people’s home-moving plans.

"Lenders also responded by offering payment holidays to borrowers impacted by the pandemic, helping people stay in their homes rather than potentially being forced to sell."

In equity markets, AstraZeneca ended lower after the UK approved the Covid-19 vaccine it developed with Oxford University. The shares had already rallied on Tuesday amid expectations the vaccine would be approved this week.

Unlike the Pfizer/BioNTech vaccine, which was approved at the start of December and needs to be stored at -70C, the AstraZeneca vaccine can be stored, transported and handled at normal refrigerated conditions for at least six months, making the rollout much simpler.

News of the approval came as millions more people in England were set to be plunged into tougher Tier 4 coronavirus restrictions.

On the upside, NatWest was the standout riser after heavy losses a day earlier, while British Airways parent IAG flew higher as investors bet that prospects for the travel sector in 2021 would be brighter.

Energean gained after saying it was buying the remaining 30% stake in Israeli offshore field Energean Israel Limited that it does not already own from Kerogen Capital for between $380m and $405m.