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Stocks in London fell on Wednesday, keeping in step with losses for global markets, with major oil companies and bank stocks leading the way lower. Investors were also absorbing new spending plans by U.K. Chancellor Rishi Sunak to help the country tackle economic fallout from the coronavirus pandemic.

The FTSE 100 index fell 0.6% to 6,393.33. Up 14% in November so far, that gain would mark the best monthly return for the index since January 1989. Investors have been cheered by a string of positive COVID-19 vaccine news and a rally for oil prices, up 26% in the same period.

But energy companies, such as Royal Dutch Shell
RDSA,
-1.92%

and BP
BP,
-2.63%

dropped around 2% each on Wednesday, weighing on the FTSE 100. Oil’s losses were in step with a pullback seen across markets after the Dow industrials hit 30,000 for the first time on Tuesday.

U.S. markets will close on Thursday for the Thanksgiving Day holiday, reopening on Friday for a shortened session.

The pound was flat at $1.3360, and has gained about 0.3% on the week and 0.5% for the month of November.

Sunak’s spending review, announced on Wednesday, confirmed another £38 billion ($50 billion) for public services to fight the COVID-19 pandemic, and £55 billion for departments to respond in 2021.

“Rishi Sunak’s spending review was a sobering assessment of not only the challenges facing the U.K. economy, but also the enormous economic damage created by the pandemic and the numerous lockdowns around the country, with the budget deficit for 2020 expected to come in at £394 billion,” said Michael Hewson, chief market analyst at CMC Markets, in a note to clients.

Read: Bank of England chief contradicts Chancellor Rishi Sunak by warning a ‘no-deal’ Brexit would hurt economy more than COVID

Banks were under pressure from the start of trading with Lloyds Banking
LLOY,
-3.46%

and Barclays
BCS,
-4.73%

dropping more than 3% each. “That decline comes off the back of a particularly fruitful period for the banks, with vaccine announcements from Pfizer
PFE,
-0.19%
,
Moderna
MRNA,
+10.77%

and AstraZeneca
AZN,
-2.50%

helping to lessen the risk of an even more drawn-out economic collapse,” said Joshua Mahony, senior market analyst at IG, in a note to clients.

“Fears that a wave of bankruptcies would cripple the banks has failed to arrive thus far, with Rishi Sunak’s spending spree helping to stave off many of the worst economic outcomes from such a period of economic contraction. However, while the economic picture doesn’t look too bad for now, there is a risk that banks will suffer in the event we do see a sharp rise in job losses come March,” said Mahony.

Banks were in the spotlight earlier after Yves Mersch, vice-chair of the European Central Bank’s supervisory board, told the Financial Times that eurozone banks may be allowed to resume dividend payouts in 2021 if their balance sheets can weather the continuing pandemic storm.

Banks were ordered to halt dividends and share buybacks as the COVID-19 pandemic began sweeping through Europe in March, and the ECB is expected to reach a decision on those payouts by year-end.



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