Blue-chips stayed in the red on Wednesday after a weaker performance on Wall Street on Tuesday looked like repeating itself on Wednesday.
The FTSE 100 Index extended losses to stand 13.36 points adrift at 6632.04, although small-cap indices edged back into the black.
The Dow Jones Industrial Average closed nearly 91 points off at 18,313.77 on Tuesday and analysts said it was likely to start the session ahead in similar fashion.
Craig Erlam at foreign exchange trader OANDA said positive sentiment appeared to have been undermined by lacklustre monetary stimulus measures from central banks.
"There’s also likely to be a case of traders adopting more of a cautious approach ahead of tomorrow’s Bank of England decision and Friday’s US job report," he said.
The price of a barrel of Brent crude rallied 0.6% to US$42.05 and a barrel of US light crude gained 0.7% to US$39.79 after US oil and gasoline inventories dropped, according to the American Petroleum Institute.
FXTM chief market strategist Hussein Sayed said: “This helped stabilise prices somehow, but focus today will turn to the Energy Information Administration release.”
Britain got yet another dose of bad economic news following the fateful ‘Brexit’ vote as data showed the service industry shrank in July at the same rate as in June.
But the all-sector PMI racked up a record fall from 51.9 in June to 47.3 in July, signalling a 0.4% GDP decline in the third quarter.
Chris Williamson at Markit said: “The unprecedented month-on-month drop in the all-sector index has undoubtedly increased the chances of the UK sliding into at least a mild recession."
In small-caps, shares in TechFinancials Inc (LON:TECH) stayed at the top of the tree with a 55.9% gain to 13.25p after it voiced confidence about meeting market expectations as it updated on the first half ahead of releasing interims next month.
Science in Sport PLC (LON:SIS) limbered up 15.45% to 63.5p as the sports nutrition company became the official sport nutrition supplier to US cycling governing body USA Cycling.
But Landore Resources Limited (LON:LND) sank 15% to 2.4p as it said it was resubmitting samples for analysis from the BAM East gold prospect on its Junior Lake Property, Ontario, Canada.
Kibo Mining PLC (LON:KIBO) pared losses but was still 8.5% down at 5.4p as it said possible policy changes by the Tanzanian government over electricity power agreements may push back the timetable for its Mbeya thermal power station.
Meanwhile, power generator rental group Aggreko PLC (LON:AGK) dropped 12.75% to 1074p on news that a downturn caused by lower oil prices was affecting a number of its markets.
In the top flight, fashion chain Next Plc (LON:NXT) advanced 3.8% gain to 5325p as the mid-point of its profit before tax guidance for the year shifted up from £799mln, as flagged to the market in May, to £810mln.
HSBC Holdings PLC (LON:HSBA), up 3.6% at 500.4p, was also wanted as it sweetened a bitter pill of lower profits with a pledge to hand back up to US$2.5bn to shareholders in the second half.
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Preview
London’s FTSE 100 is set to start Wednesday higher, albeit not by very much.
Economics and central bank policy remains a key focus amid continuing uncertainty – not just Brexit but on a broader malaise in Europe and beyond, as well as the renewed weakness in key commodity markets.
Stress testing has put European banks back under scrutiny, meanwhile second guessing on Central Bank policy making continues to sway sentiments one way and then another.
Tomorrow brings a Bank of England rate decision where some expect to see a change for the first time in seven years – with the market having fairly high hopes for a rate cut.
It makes economic stats (UK services PMI) a potential focal point, as signs of deterioration could pile on more pressure for a BoE cut.
In the markets economic worries pulled US stocks lower on Tuesday, with consumer stocks among the worst performers.
The Dow Jones dropped 90 points, 0.49%, to end the day at 18,313 while the S&P 500 lost 0.64% to 2,157 and the Nasdaq fell 0.9% to 5,137.
In Asia, the Shanghai Composite was the only notable riser, but was up just 0.11% to 2,974.
Japan’s Nikkei slumped 1.4% to 16,156 and Hong Kong’s Hang Seng lost 1.7% to 21,750.
Australia’s ASX 200 was down 1.25% at 5,471.
Here in London, the FTSE 100 is seen only a sliver higher. Spreadbetting and CFD group IG sees the benchmark up less than 4 points at 6,646 to 6,651 about an hour before the open.