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Concerns over inflation and slowing consumer demand dragged the markets into the red at the end of trading on Tuesday.
A cut to the World Bank’s growth forecasts has reminded investors of the broader problems facing the global economy, while interest rate rises continue to weigh on traders’ minds.
The FTSE 100 ended the day down 9.29 points, or 0.12%, at 7,598.93 points.
The German Dax decreased by 0.66% by the end of the session while the French Cac fell 0.74%.
Michael Hewson, chief market analyst at CMC Markets UK, said: “After such a positive session on Monday, European markets have slipped back on a trifecta of concerns over higher prices, higher rates and shrinking margins, after the Reserve Bank of Australia surprised consensus by hiking its headline rate by more than expected.
“Sentiment was also hit by disappointing economic data.
“German factory orders data for April slumped more than expected, by 2.7%, while in the UK the latest retail sales numbers from the British Retail Consortium showed like-for-like sales in May declined 1.5% year on year.”
In London, retail stocks such as Marks & Spencer and Currys were unsurprisingly among the fallers amid concerns shoppers are tightening their belts, highlighted by the BRC data.
In the US, stocks edged lower as retail giant Target warned that profit margins could come under pressure.
Meanwhile, sterling had a steady session as the pound increased by 0.11% against the dollar to 1.259, and gained 0.17% against the euro to 1.177.
In company news, Ted Baker saw its value drop sharply after the frontrunner to take over the fashion chain pulled out of the running in the latest blow to its sale plans.
Ted Baker said its preferred bidder told the group on Monday evening that it would not be going ahead with an offer.
Shares in the brand fell by 25.2p to 111.6p as a result.
Elsewhere, coach firm National Express slipped after it warned that the recovery of its profit margins will be stalled by efforts to keep prices low for customers.
The group saw shares slide by 25.6p to 245p as it told shareholders that both low UK fares and wage inflation in the US will hit margins and pull them below its target in the short term.
Biffa soared in value after it signalled it would be willing to accept a potential £1.4 billion bid from a US investor, despite also confirming it is under investigation by HM Revenue and Customs.
The waste firm finished the day 88.4p higher at 413.4p.
JD Sports fell by 4.8p to 118.45p after it was provisionally found by the UK competition watchdog to have conspired to fix prices of Rangers club clothing merchandise.
Meanwhile, oil prices remained resilient as Brent crude increased by 0.94% to 120.63 US dollars per barrel when the London markets closed.
The biggest risers in the FTSE 100 were Melrose Industries, up 4.3p at 142.1p, Rio Tinto, up 135p at 6,091p, AstraZeneca, up 158p at 10,230p, GSK, up 24.6p at 1,719.6p, and BP, up 6.05p at 446.5p.
The biggest fallers of the day were JD Sports, down 4.8p at 118.45p, Intermediate Capital Group, down 56.5p at 1,542.5p, Rightmove, down 20.2p at 573.6p, Kingfisher, down 9p at 257.8p, and Ocado, down 30.6p at 920.8p.