The FTSE 100 sank on Friday and in the process wiped nearly wiped the entire weeks gains as the latest round of UK travel restrictions, poor Chinese data, and a stalemate in the US stimulus debate sapped confidence from the market.

The FTSE 100 traded as low as 6,033 in morning trading on Friday, before recovering some of the losses as US markets opened.

The implementation of fourteen day quarantines for UK citizens returning from France, Holland and Malta sparked negativity in markets as airline International Consolidated Airlines crashed over 6% whilst aircraft engine maker Rolls Royce shed 4%.

There was little in the way of positivity from FTSE 100 shares with only minor gains noticeable in packaging company Smurfit Kappa and a number house builders.

Stimulus stalemate

In addition to concern around further restrictions on travel, the US Congress has taken leave without finalising a $1 trillion stimulus package to support the US economy through the coronavirus pandemic.

There are currently no talks scheduled to break the stalemate between Democrats and Republicans.

With Congressmen going on their vacation, a deal over potential stimulus will be postponed. This has left a vacuum in US politics and attention has shifted towards the upcoming US election in November and the possibility of Joe Biden taking the White House.

The market has mixed feeling about Joe Biden who is seen to be a negative force through tax increases but its also likely to enact significant infrastructure spending which will provide support for the US economy.

Chinese data

Chinese data was also a cause for concern as consumer activity remained soggy and industrial production missed estimates.

“Once again Chinese retail sales became a sticking point for the markets. Though an improvement on June’s -1.8%, July’s -1.1% reading marked the 2nd month in a row that retail sales in the country had failed to climb back into positive territory as expected,” said Connor Campbell, analyst at Spreadex.

“Combine that with an industrial production reading that remained unchanged at 4.8%, missing the forecast 5.1%, and there are signs of a stalling recovery in the superpower.”

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