London's FTSE slips on energy drag, investors assess UK economic data

"Investors seem to like the fact that Chemring is one of many companies experiencing stronger prospects thanks to the Russia-Ukraine war encouraging governments around the world to spend more on defence," said Russ Mould, investment director at AJ Bell. Meanwhile, digital retailer N Brown tanked 14.9% following poor full-year results and bleak outlook.

Britain's benchmark FTSE 100 dropped in early trade on Tuesday, dragged down by energy stocks, while investors assessed fresh economic data in the face of concerns over the prospect of a global slowdown. The resource-heavy FTSE 100 slipped 0.4% as of 0844 GMT, with energy stocks shedding 1.7% tracking lower crude oil prices.

The all-sector PMI eased to 53.8% in May from 54.6 in the previous month, while the S&P Global/CIPS UK Construction PMI rose to 51.6 from 51.1 in April. This comes a day after British retail sales growth slowed to a seven-month low in May.

"The British Retail Consortium has stated that growth in discretionary spending continues to tumble as the high cost of living squeezes households," Rabobank analysts said in a note. "Despite this, very sticky inflation data in the UK suggests more BoE rate hikes are to be expected."

A Reuters poll showed that the Bank of England is expected to be far more aggressive in policy tightening to contain stubbornly-high inflation, with majority of the economists surveyed forecasting a 25-basis-point lift this month. The domestically focused FTSE 250 midcap index was up 0.1%, boosted by a 8.4% gain in Paragon Banking Group Plc after it upgraded its annual net interest margin outlook and buyback target.

Among other single stocks, British defence contractor Chemring jumped 9.3% after it reported higher order intake in the first half of the year. "Investors seem to like the fact that Chemring is one of many companies experiencing stronger prospects thanks to the Russia-Ukraine war encouraging governments around the world to spend more on defence," said Russ Mould, investment director at AJ Bell.

Meanwhile, digital retailer N Brown tanked 14.9% following poor full-year results and bleak outlook.

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