After hitting a fresh five-year high the day before, London's benchmark FTSE 100 index slumped on Thursday morning as traders reacted to weaker-than-expected economic growth figures from Japan and across Europe.
Overnight, it was announced that Japanese gross domestic product (GDP) contracted by 0.1% in the fourth quarter, down 0.4% on an annualised basis. The consensus estimate was for 0.4% GDP growth.
Fourth-quarter GDP in the Eurozone also failed to live up to market expectations as sharper-than-expected contractions was registered in France, Italy and even economic powerhouse Germany, which saw GDP decrease by 0.6% quarter-on-quarter (q/q).
The single-currency region saw its economy contract by 0.6% q/q in the final three months of 2012, worse than the 0.4% GDP decline expected. This compares with the smaller 0.1% contraction registered in the third quarter.
The euro slumped nearly 1.0% against the dollar
today and was trading at $1.3323 by midday.
"The reaction to the GDP figures was understandably negative, although looking at how overbought European stocks and the euro have become, people may just be using this as an excuse to get out and wait for the next opportunity to buy at a low again," said market analyst Craig Erlam from Alpari.
"Traders still appear to be cautiously optimistic at this stage, but this can quickly change as we've seen in the past," he said.
As markets digest the figures, the focus is likely to turn to initial jobless claims figures Stateside which are scheduled for release this afternoon, with analysts expecting claims to total 360,000 last week, down from the 366,000 figure the week before.
FTSE 100: AMEC drops on cautious outlook
Engineering and project management group AMEC may have hiked its dividend by a fifth after beating forecasts in 2012, but shares
dropped early on after warning of more modest growth this year.
Power systems group Rolls-Royce was also lower after its full-year results, in which it delivered 8.0% growth in underlying revenue and a 24% increase in underlying profits. While results were in line, analysts at Jefferies said that the company's cash flow guidance "may disappoint a number of observers".
After an earlier rise following its full-year results, mining group Rio Tinto tracked the market lower in mid-morning trade. The company announced that it swung to its first-ever full-year loss in 2012, dragged down by impairments against its aluminium and Mozambique coal assets. However, on an adjusted basis, profits still came in ahead of consensus forecasts.
Asset management firm Aberdeen was a high riser after buying sector peer Artio Global Investors for $175m. Canaccord Genuity upgraded the stock to 'buy' this morning "given the earnings per share expansion from current acquisitions".
Consumer products giant Reckitt Benckiser was making gains after Oriel Securities raised its recommendation to 'add' and hiked its target price for the shares from 3,730p to 4,700p. Deutsche Bank, Nomura and Credit Suisse also raised their target prices today.
Outsourcing group Capita was lower after buying Northgate Managed Services, a cloud-based infrastructure solutions and specialist managed services, for £65m.
FTSE 250: Britvic and AG Barr fall on merger update
Soft drinks peers Britvic and AG Barr were in the red this morning after announcing late yesterday afternoon that the Office of Fair Trading has referred the tie-up to the Competition Commission.
Bumi plc shares fell 10% as co-founders of the coal miner financier Nathanial Rothschild and the Bakrie Group continued to butt heads over fate of the business. Shareholders are meeting next Thursday to vote on a proposal by Rothschild to replace members of the board.
Environmental technology health and safety group Halma gained after saying that adjusted profits would be in line with expectations this year.
FTSE 100 - Risers
Aberdeen Asset Management (ADN) 426.00p +2.40%
Next (NXT) 4,178.00p +1.11%
Reckitt Benckiser Group (RB.) 4,459.00p +0.91%
Unilever (ULVR) 2,567.00p +0.86%
Resolution Ltd. (RSL) 263.20p +0.53%
BHP Billiton (BLT) 2,204.50p +0.52%
Aggreko (AGK) 1,638.00p +0.49%
InterContinental Hotels Group (IHG) 1,954.00p +0.36%
Diageo (DGE) 1,908.50p +0.16%
Prudential (PRU) 945.50p +0.11%
FTSE 100 - Fallers
Amec (AMEC) 1,054.00p -6.23%
Shire Plc (SHP) 2,067.00p -3.64%
Carnival (CCL) 2,501.00p -2.87%
Severn Trent (SVT) 1,566.00p -2.73%
Eurasian Natural Resources Corp. (ENRC) 398.90p -2.61%
Kingfisher (KGF) 273.00p -2.50%
Vodafone Group (VOD) 167.40p -2.48%
Polymetal International (POLY) 1,036.00p -2.45%
Evraz (EVR) 293.40p -2.43%
Kazakhmys (KAZ) 747.50p -2.16%
FTSE 250 - Risers
Daejan Holdings (DJAN) 3,548.00p +7.52%
Man Group (EMG) 112.90p +3.96%
SVG Capital (SVI) 355.40p +2.48%
SIG (SHI) 138.30p +0.95%
Brown (N.) Group (BWNG) 398.70p +0.86%
Halma (HLMA) 481.10p +0.73%
Greggs (GRG) 481.90p +0.67%
Fenner (FENR) 412.50p +0.61%
Big Yellow Group (BYG) 373.30p +0.48%
Ferrexpo (FXPO) 291.50p +0.45%
FTSE 250 - Fallers
Bumi (BUMI) 395.30p -11.13%
Britvic (BVIC) 384.20p -8.52%
New World Resources A Shares (NWR) 283.70p -6.92%
Soco International (SIA) 361.70p -5.02%
Barr (A.G.) (BAG) 495.00p -3.98%
Synergy Health (SYR) 1,045.00p -3.86%
Pennon Group (PNN) 650.00p -3.85%
Premier Oil (PMO) 385.60p -3.65%
Morgan Crucible Co (MGCR) 285.70p -3.58%
Vesuvius (VSVS) 378.60p -3.29%