FTSE 100 drops below 6700 amid manufacturing slump
London's top flight index tumbled below the 6700 mark as investors baulked at a bleak economic update from the UK manufacturing industry.
The FTSE 100 index slipped 30.5 points to 6693.95 after the manufacturing sector, which accounts for around 10% of the UK economy, endured its sharpest fall for more than three years.
The closely watched Markit/CIPS UK Manufacturing purchasing managers' index (PMI) fell to levels last seen in February 2013, as it hit 48.2 in July, down from 52.4 in June and below economists' expectations of 49.1.
A reading above 50 indicates growth.
The survey showed that the manufacturing sector had dropped even further since the flash UK manufacturing PMI published towards the end of last month when it fell back to a 41-month low of 49.1.
The result will heap further pressure on the Bank of England to hand the UK economy a fresh dose of monetary stimulus when it votes on interest rates on Thursday.
Banks and housebuilding stocks suffered after the PMI update amid fears that UK economy growth is grinding to a halt following the Brexit vote.
Taylor Wimpey was the biggest faller on the London market, off more than 4% or 7p to 147.7p, while Barclays dropped 2% or 3.2p to 151.4p.
On the currency markets, t he pound sank against the dollar following the dire PMI report, before paring back to a 0.16% fall to 1.32 US dollars.
Sterling was also 0.19% down against the euro at 1.181 euros.
Across Europe, Germany's Dax was marginally lower and the Cac 40 in France dropped 0.7%.
The price of oil plunged 3.2% or 1.38 dollars to 42.15 dollars a barrel, after a survey showed that Opec output hit record highs in July.
Royal Dutch Shell B was off 51p to 1951p after the RBC downgraded the oil major from outperform to sector perform amid fears that Shell's debt problem will get worse before it gets better.
In stocks, supermarket chain Morrisons was down 4.3p to 181.5p as the market reacted coldly to its latest round of price cuts.
The grocer has pledged to trim 18% off the price of more than 1,000 products, as fierce competition in Britain's supermarket price war shows little sign of abating.
Mining stocks were in the ascendency on the London market amid signs of strength in the Chinese manufacturing sector following higher-than-expected figures.
The Caixin manufacturing PMI reading for July was 50.6, significantly higher than the 48.6 reading for June, and also above expectations of 48.7.
Anglo American was the biggest riser, up 2.2% or 18.3p to 848.8p, while Rio Tinto climbed 24.5p to 2486p.
Daily Mirror publisher Trinity Mirror saw its shares pick up after it revealed that sales were boosted by the acquisition of rival Local World last year, which it snapped up for £187 million.
However, the firm warned that revenues could be hit as a result of the fallout from Britain's decision to leave the European Union.
Trinity Mirror said the referendum outcome had created "increased macroeconomic uncertainty", adding that while the impact is hard to assess, "based on current UK growth forecasts there is a risk that our revenues could be lower than expectations".
Shares were up 6% or 4.8p to 79.8p.
The biggest risers on the FTSE 100 Index were Anglo American up 18.3p to 848.8p, BHP Billiton up 18.6p to 963.3p, Associated British Foods up 46p to 2737p, and HIKMA Pharmaceuticals up 42p to 2676p.
The biggest fallers were Taylor Wimpey down 7p to 147.7p, Berkeley Group down 107p to 2576p, Barratt Developments down 13.4p to 424.1p, and Royal Dutch Shell A down 55.5p to 1888.5p.