FTSE 100 dips after weak economic data fans recession fears

UK's blue-chip index closed in the red on Tuesday, with healthcare and commodity stocks leading losses after data showed British private-sector economic activity fell at its fastest rate in two years in January. The FTSE 100 closed the session 0.4% lower, with drugmaker AstraZeneca and miner Glencore being the top drags.

UK's blue-chip index closed in the red on Tuesday, with healthcare and commodity stocks leading losses after data showed British private-sector economic activity fell at its fastest rate in two years in January.

The FTSE 100 closed the session 0.4% lower, with drugmaker AstraZeneca and miner Glencore being the top drags. The S&P Global/CIPS flash composite Purchasing Managers' Index (PMI) dropped to 47.8 in January from 49.0 in December, at the bottom end of economist forecasts, as businesses blamed higher Bank of England interest rates, strikes and weak consumer demand for the slowdown.

"The PMI wasn't particularly robust. It is a reminder that 2023, from a macroeconomic perspective, is likely to be a challenging year," said Richard Flax, chief investment officer at Moneyfarm. The healthcare and mining sectors fell 2.4% and 0.7% respectively.

Separately, data showed Britain's government borrowed more last month than in any December since monthly records began 30 years ago, reflecting the huge cost of energy support and soaring debt interest linked to rising inflation. "A difficult morning for the UK data-wise, as the higher-than-expected borrowing figures highlight the tight fiscal constraints the government is working under," said Stuart Cole, head macro economist at Equiti Capital.

Market participants are pricing in a 69.5% chance of a 50-basis-point hike by the Bank of England next week. Interest rate hikes are expected to continue with the U.S. Federal Reserve and the European Central Bank coming out with their monetary policy decisions next week.

Senior surged 7.5% after the aerospace company said its adjusted profit for 2022 is expected to exceed expectations, pushing the FTSE 250 midcaps to close up 0.3%. Associated British Foods fell 2.0% after the group cautioned economic headwinds may dent consumer spending in 2023.

Aircraft engine maker Rolls-Royce gained 3.0% to the top of FTSE 100 after Exane BNP Paribas upgraded the stock to "neutral" from "underperform" on the company having a balanced risk-reward ratio.

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