A gauge of growth in the dominant U.S. services sector fell short of expectations for December, hitting a six-month low as indexes on employment, orders and business activity all declined.
The FTSE 100 index was down 0.4 percent at 1209 GMT, recovering from worse losses earlier but still underperforming the pan-European FTSEurofirst 300 index. Shares of Ashtead, a UK industrial-equipment-hire company, plunged 6.8 percent. The followed an 11 percent slide for its U.S. rival United Rentals after a broker downgraded it.
Sterling slipped to a 17-month low against the dollar after the Markit/CIPS UK Services Purchasing Managers' Index (PMI), a closely-watched monthly survey, suffered its steepest decline in more than three years. It showed growth in new orders and employment slowed across the businesses that make up the bulk of Britain's private sector economy.
"The surveys lost ground in the second half of the year but are still at a level consistent with a solid pace of GDP growth. We're not in a bad place, just not as super-strong as we were early in 2014," said Alan Clarke at Scotiabank.
