The London markets and the pound both tumbled on a torrid day for UK traders after new figures revealed a surge in unemployment in the face of the pandemic.
Sentiment slid after the Office for National Statistics revealed a 138,000 jump in UK unemployment between June and August – the largest increase since summer 2009.
Global sentiment was also broadly lower as coronavirus cases continued to grow in mainland Europe.
The FTSE 100 closed 31.67 points lower at 5,969.71 at the end of trading on Tuesday.
Connor Campbell, financial analyst at Spreadex, said: “After a rise in the UK’s unemployment rate, the FTSE 100 fell, returning to the sub-6000 levels seen before last Thursday’s sharp rebound.
“Alongside Covid-19 worries and the vested interest all investors have in the US election, the UK also has Brexit to contend with, and Thursday’s deal ‘deadline’.
“It appears that the big question is less whether an agreement will be reached by the 15th and more whether that Johnson-imposed end date will be strictly enforced.”
The combination of higher unemployment and caution over Brexit, despite Boris Johnson telling ministers there should be “no fear” over failing to secure a deal with the EU, pressed on the pound against the dollar.
The pound fell by 0.41% versus the US dollar at 1.297 but was up 0.19% against the euro at 1.104.
Europe’s other major markets saw traders spooked by the tightening of restrictions as politicians continue to attempt to thwart rising coronavirus case numbers.
The German Dax decreased by 1%, while the French Cac moved 0.74% lower.
Across the Atlantic, the Dow Jones and S&P 500 both moved a touch lower as trading cooled following a strong session on Monday.
Back in the UK, supermarkets had a strong trading session, with Tesco, Morrisons and Sainsbury’s all making notable gains after new figures from Kantar revealed a 10.6% leap in grocery sales over the four weeks to October 4.
In company news, high street fashion chain French Connection slid after it laid bare the harsh impact the Covid-19 lockdown had on the already-struggling company.
Bosses revealed sales in the six months to July 31 plunged 53% to just £23.9 million, while its losses extended to £13.2 million. Shares fell 2.07p to 6.87p.
Elsewhere, pub and bar owner Mitchells & Butlers closed lower after it launched redundancy consultations with staff.
It closed 3.8p lower at 137p after it said it is facing “significant difficulties” following the introduction of the curfew and tighter restrictions in some regions.
Shares in Marshall Motor powered 12.5p higher to 135p after the car dealership revealed it now expects to turn a full-year profit thanks to pent-up consumer demand since lockdown.
The price of oil rebounded after slumps in its two previous trading days, as it was buoyed by higher Chinese import figures.
The price of a barrel of Brent crude oil increased by 1.85% to 42.41 US dollars.
The biggest risers on the FTSE 100 were Scottish Mortgage Investment Trust, up 19p at 1,075p; SSE, up 22p at 1,348p; Experian, up 49p at 3,063p; and Tesco, up 3.3p at 222.4p.
The biggest fallers of the day were Rolls-Royce, down 11.75p at 183.1p; British Land, down 17.3p at 355.6p; Lloyds Group, down 1.2p at 26.87p; and Hargreaves Lansdown, down 64.5p at 1,477.5p.