Despite being Thanksgiving, tensions between the US and China ramped up after Donald Trump signed legislation supporting pro-democracy campaigners in Hong Kong – leading to threats of retaliation from Beijing.
As a result, the internationally-focused FTSE 100 closed the day down 13.35 points at 7,416.43, recovering slightly from heavy falls first thing on Thursday morning.
David Madden, market analyst at CMC Markets UK, explained: “Traders fear that US-China trade relations could take a turn for the worst following President Trump’s decision to back the Hong Kong bill.
“The US government has put its support behind the citizens of Hong Kong, so that is likely to attract a negative response from Beijing. The Chinese government will view this move by Mr Trump as an attempt to meddle in their internal affairs.”
With US markets closed for the holiday, he did point out volatility was lower than it could have been without the day off.
In Europe, the French Cac closed down 0.24% and the German Dax closed down 0.31%.
The market also took a hit from the pound strengthening in early trading following publication of a new opinion poll that suggests Boris Johnson’s Conservatives are on course for a majority at the upcoming election.
However, by the time markets closed, it was down against the dollar by 0.1% at 1.291. Against the euro it was down 0.2% with a pound worth 1.173 euros.
In company news, lender Virgin money saw shares rocket despite scrapping its dividend payout after a £385 million hit for payment protection insurance (PPI) pushed it deeper into the red.
The company, which was previously known as CYBG, saw shares jump by 27p to 170p after it revealed that statutory pre-tax losses widened to £232 million for the year to September 30.
Elsewhere, online grocery firm Ocado led the FTSE 100 after its shares rose on the back of plans to open its first mini-robotic warehouse in Bristol, with the creation of about 815 jobs in the area.
Shares in the company closed 42p higher at 1,208p after it announced the creation of its sixth UK warehouse.
Hornby shares increased by 2.5p to 35p after the model train business said it is back on track in its turnaround after the company narrowed its losses for the year.
Shares in guarantor lender Amigo Loans soared after the under-pressure company said it was making progress in restructuring its business and dealing with regulatory concerns. Shares closed 5p higher at 65p on Thursday.
Quindell investors who lost out heavily after the company was forced into restating its profits, leading to a Serious Fraud Office investigation, have started legal proceedings against the business.
Law firm Harcus Parker has written a so-called “letter before action” to insurance group Watchstone, formerly Quindell, claiming shareholders lost out due to misleading statements to the stock exchange. Shares in Watchstone closed down 1p at 144p.
The biggest risers on the FTSE 100 were Ocado, up 42p at 1,208p, St James’ Place, up 21.5p at 1,119p, Landsec, up 15.8p at 964.3p, Lloyds banking group, up 1p at 62.7p, and Phoenix, up 11p at 744.4p.
The biggest fallers on the index were Vodafone, down 6.28p at 154.16p, National Grid, down 26.5p at 896p, Ferguson, down 164p at 6,840p, Severn Trent, down 51p at 2,285p, and Ashtead, down 53p at 2,391p.