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At 1200 BST, the FTSE 100 was down 0.41% at 7,576.27, and the FTSE 250 was 0.09% weaker at 20,400.68.
“Weak trading in the US may have seen the FTSE 100’s advance stall on Tuesday but the index was doing its best to eke out gains ahead of the Royal Jubilee Bank Holiday on Wednesday morning,” said AJ Bell investment director Russ Mould.
“By the time investors have returned after the festivities they could be facing a big hangover depending on the turn Wall Street takes over the next few days and the latest US jobs reading due on Friday.
“Inflationary concerns look set to continue to dominate the market mood.”
On the economic front, investors were digesting the news that UK manufacturing growth slowed to its weakest pace in seven months in May, as output, new orders and employment rose at weaker rates.
The seasonally-adjusted S&P Global/CIPS UK manufacturing purchasing managers’ index (PMI) came in at 54.6 for the month – unchanged from the earlier flash estimate, and down from 55.8 in April.
It was still, however, above the 50-point level that separates expansion from contraction, where it has remained for 24 months.
“The rate of expansion in UK manufacturing output eased to a seven-month low in May as companies face a barrage of headwinds,” said Rob Dobson, director at S&P Global Market Intelligence.
“Factories are reporting a slowdown in domestic demand, falling exports, shortages of inputs and staff, rising cost pressures and heightened concern about the outlook given geopolitical uncertainties.
“The consumer goods sector was especially hard hit, as household demand slumped in response to the ongoing cost of living crisis.”
Elsewhere, the latest BRC-Nielsen IQ shop price index showed that food price inflation reached a 10-year high in May.
Food inflation rose to 4.3% from 3.5% in April, marking the highest rate since April 2012, with fresh food inflation rising 4.5% from 3.4%, while ambient food inflation pushed up to 4% in May from 3.5% a month earlier.
Shop price annual inflation accelerated to 2.8% in May from 2.7% the month before, marking the highest rate of inflation since July 2011.
“Retailers have been working hard to protect their customers from these rising costs, particularly at a time when households are being impacted by a huge rise in household energy bills,” said BRC chief executive Helen Dickinson.
“It is likely to get worse before it gets better for consumers with prices continuing to rise and a further jump in energy costs coming in October.
“With little sign that the cost burden on retailers will ease any time soon, they will be left with little room for manoeuvre, especially those whose supply chains are affected by lockdowns in China and the war in Ukraine.”
Still on data, the latest survey from Nationwide showed that house prices grew for a 10th consecutive month in May, but the rate of growth appeared to be slowing as the ongoing cost of living crisis looked set to weigh on prices.
On the continent, German retail sales plunged far beyond expectations in May, as rising consumer prices and lockdowns in China took their toll.
According to Destatis, retail sales slumped 5.4% month-on-month, making for the biggest fall in a year, seriously beating market forecasts for a 0.2% decline.
Eurozone manufacturing growth, meanwhile, fell to an 18-month low in May, with orders down for the first time in nearly two years amid inflationary pressures.
The S&P Global eurozone manufacturing purchasing managers’ index declined to 54.6 from 55.5 in April.
Finally, China’s Caixin general manufacturing purchasing managers index increased to 49.1 in May, up from April’s 26-month low of 46.0 to beat market forecasts of 48.0.
However, May’s reading also marked the third consecutive monthly decline in factory activity, due to stringent Covid-19 control measures, as both output and new orders fell, albeit at a softer rate, amid further declines in both export orders and employment.
In corporate news, iconic bootmaker Dr. Martens rocketed more than 23% after it posted a surge in annual pre-tax profits, driven by a “very strong performance” in the Americas and Europe, the Middle East and Africa.
Retailer Frasers Group ticked more than 1.2% higher as it announced the acquisition of embattled online womenswear retailer Missguided for £20m in cash.
Tullow Oil was also in focus, gaining over 2% after it agreed to buy Capricorn Energy in an all-share deal.
Under the terms of the transaction, Capricorn shareholders would be entitled to 3.8068 new Tullow shares for each of their Capricorn shares.
Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk and Iain Gilbert.
Market Movers
FTSE 100 (UKX) 7,581.52 -0.34%
FTSE 250 (MCX) 20,424.38 0.03%
techMARK (TASX) 4,405.15 -0.42%
FTSE 100 – Risers
Rolls-Royce Holdings (RR.) 89.00p 2.66%
ITV (ITV) 71.72p 2.05%
BAE Systems (BA.) 771.40p 2.04%
Reckitt Benckiser Group (RKT) 6,252.00p 1.86%
Lloyds Banking Group (LLOY) 45.61p 1.62%
British American Tobacco (BATS) 3,556.50p 1.56%
M&G (MNG) 219.00p 1.34%
BT Group (BT.A) 189.55p 1.23%
NATWEST GROUP PLC ORD 100P (NWG) 230.90p 1.18%
WPP (WPP) 931.40p 1.17%
FTSE 100 – Fallers
National Grid (NG.) 1,125.00p -3.93%
Harbour Energy (HBR) 370.70p -3.51%
Aveva Group (AVV) 2,203.00p -3.29%
Vodafone Group (VOD) 126.62p -3.03%
Flutter Entertainment (CDI) (FLTR) 9,522.00p -2.44%
Severn Trent (SVT) 2,845.00p -2.40%
Intermediate Capital Group (ICP) 1,538.00p -2.35%
St James’s Place (STJ) 1,264.50p -2.28%
Experian (EXPN) 2,609.00p -1.77%
Royal Mail (RMG) 305.50p -1.64%
FTSE 250 – Risers
Dr. Martens (DOCS) 265.40p 22.64%
RHI Magnesita N.V. (DI) (RHIM) 2,564.00p 6.39%
Mediclinic International (MDC) 409.80p 5.35%
Capricorn Energy (CNE) 205.80p 3.68%
Babcock International Group (BAB) 349.60p 3.55%
Ferrexpo (FXPO) 180.80p 3.49%
Currys (CURY) 86.60p 3.40%
Countryside Partnerships (CSP) 286.20p 3.17%
TI Fluid Systems (TIFS) 188.00p 2.96%
IntegraFin Holding (IHP) 309.60p 2.65%
FTSE 250 – Fallers
Wood Group (John) (WG.) 219.80p -7.88%
Synthomer (SYNT) 307.00p -6.46%
Trustpilot Group (TRST) 91.75p -4.18%
Syncona Limited NPV (SYNC) 201.50p -4.05%
Hill & Smith Holdings (HILS) 1,348.00p -3.30%
Abrdn Private Equity Opportunities Trust (APEO) 469.00p -3.30%
Baltic Classifieds Group (BCG) 149.40p -3.24%
Kainos Group (KNOS) 1,223.00p -3.01%
Edinburgh Worldwide Inv Trust (EWI) 174.40p -2.57%
IP Group (IPO) 84.95p -2.52%
