By Sagarika Jaisinghani and Susan Mathew
(Reuters) - London's FTSE 100 erased session gains to end at 10-week lows on Friday after Britain postponed the easing of a coronavirus-induced lockdown as cases surged, raising fears that a nascent economic recovery may reverse.
Just hours after imposing tougher measures on swathes of northern England, Prime Minister Boris Johnson announced that casinos, bowling alleys and skating rinks, due to reopen on Saturday, would remain shut for at least two more weeks.
"The UK's move away from further easing of lockdowns... put bullish sentiment on the back foot, and further reduced the desire to move back into stocks at month end," said Chris Beauchamp, chief market analyst at IG.
The FTSE 100 (FTSE) ended down 1.5% after having gained as much as 1.7% during the day when upbeat earnings from British American Tobacco (L:BATS) and Glencore (L:GLEN) had lifted the index.
But both stocks later gave up gains, down 5% and 1.4% respectively, as sentiment turned.
The blue-chips index fell 4.4% in July, its first monthly fall since the coronavirus-driven crash in March, on fears that another round of shutdowns could cripple business activity.
While a worsening economic outlook has raised bets of more stimulus from major central banks, Britain's central bank is expected to keep its policy unchanged when it meets next week.
British Airways-owner IAG (L:ICAG) tumbled 9% as it said it would raise about 2.75 billion euros ($3.27 billion) to strengthen its finances, while broadband and mobile operator BT Group (L:BT) dropped 8.6% after it laid out grim forecast for the year.
A strong sterling also weighed on internationally focused stocks on the FTSE 100.
The London Stock Exchange Group (L:LSE), meanwhile, rose 1.7% after reporting an 8% rise in first half profit and saying it may sell all or part of Borsa Italiana to help secure its $27 billion Refinitiv deal.
The mid-cap FTSE 250 (FTMC) fell 0.5%, although a 21.5% surge for Pets At Home (L:PETSP) capped losses after it posted a smaller-than-feared drop in quarterly sales.