UK's midcap index hit a fresh one-month low on Tuesday as a looming gas crisis in Europe exacerbated fears of recession, while investors awaited economic data to gauge the state of the businesses in August.
The domestically oriented FTSE 250 (.FTMC) slipped 0.1%, down for a third consecutive session, as soaring UK gas prices added fears of surging inflation that has restrained the economy. EU/NG
The exporter-heavy FTSE 100 (.FTSE) slid 0.2%, dragged by pharma and consumer companies. But oil majors Shell (SHEL.L) and BP (BP.L) inched higher, supported by rising crude prices.
Flash readings of UK business activity in August, due at 830 am GMT, are expected to show a further slowdown in growth in Britain. European stocks took some relief as euro zone numbers came in slightly better than expected. read more
"Although they're still growing, there's a fear that they could slip into contraction territory," said David Madden, market analyst at Equiti Capital in London.
"Combined with that, the Bank of England (BoE) have hiked interest rates loads of times but they're not getting inflation under control. So now they'll probably keep hiking rates and compounding the overall issue."
British consumer price inflation is set to peak at 18.6% in January, more than nine times the BoE's target, an economist at U.S. bank Citi said on Monday, raising his forecast once again in light of the latest jump in energy prices. read more
Investors expect another 50 bps rate hike when the central bank meets next month.
The Financial Times reported Liz Truss is planning to take emergency action to address the cost of living crisis without an accompanying economic forecast soon after becoming prime minister.
Among single stocks, BT Group (BT.L) rose 2.4% after the British government ruled billionaire Patrick Drahi would not be forced to cut his 12.1% stake in the company as it did not pose any national security implications.
