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UPDATE 2-British stocks sink after Sunak underscores coronavirus woes
Published at 25/11/2020 at 17:01

* UK economy to shrink by over 11% in 2020

* Unilever tops FTSE 100 ahead of UK-Dutch entities merger

* Publisher Future bottoms out midcap index

(Updates to close)

By Devik Jain and Ambar Warrick

Nov 25 (Reuters) - British stocks came off vaccine-fuelled highs on Wednesday after Finance Minister Rishi Sunak flagged a major hit to economic growth from the coronavirus, prompting an index of domestically-exposed stocks to mark its worst tumble in nearly a month.

The midcap index closed 1.1% lower, with industrials and consumer discretionary stocks weighing the most. The blue-chip index shed 0.6%, dragged by major banks and healthcare stocks.

Uncertainty over the UK's exit from Europe also hurt sentiment, after the European Union's head said the bloc could not guarantee a trade deal, and was prepared for a no-deal Brexit.

British stocks had touched a multi-month highs on the back of several positive updates in the development of a coronavirus vaccine.

But even amid progress towards a cure, the pandemic's economic ructions are just beginning to be felt. Britain's budget deficit is expected to climb to its highest level outside wartime, and its economy will shrink by 11.3% in 2020, Sunak said while unveiling a one-year spending plan.

"The Chancellor had a very fine line to tread today. Further fiscal support is clearly required to sustain the economy. ... But he also had to acknowledge the fact that borrowing this year is already near 400 billion pounds," Karen Ward, chief market strategist EMEA at J.P. Morgan Asset Management, wrote in a note.

"The need for further spending is reinforced by the eye-watering new growth and employment forecasts from the Office for Budget Responsibility."

Among individual movers, Unilever topped the FTSE 100 with a 5% jump, ahead of the Nov. 29 deadline for the cross-border merger of its British and Dutch corporate entities.

Roadside recovery company AA Plc jumped 7.1% after it agreed a sale to private equity groups that values the company at 219 million pounds.

Publisher Future bottomed out the midcap index after it agreed to buy the owner of price comparison website Go Compare for 594 million pounds ($793 million).

($1 = 0.7475 pounds)

(Reporting by Devik Jain in Bengaluru; editing by Uttaresh.V and Jonathan Oatis)

((Devik.Jain@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 6182 2062; ;))

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