London close: Stocks decline after UK services PMI miss, oil prices plunge

The Markit/CIPS purchasing managers' index on UK services fell to 55.5 in December from 55.9 the previous month. Although the reading remained just above the long-run survey trend level of 55.2, suggesting solid overall growth, economists had been expecting a slightly better print of 55.6.

A reading above 50 signals an expansion while a level below that indicates a contraction.

In China, Caxin's services PMI fell to 50.2 in December from 51.2 the previous month. The report follows weak manufacturing data on Monday, adding to concerns about a slowdown in the world's second largest economy.

Elsewhere in China, the central bank set a lower fix for the country's currency against the US dollar. The People's Bank of China set the mid-point for the so-called 'onshore' yuan at 6.5314 per dollar - its lowest since 2011 - 0.22% below the previous day's level. The yuan dropped to 6.6915 versus the greenback, its weakest level going back to the last quarter of 2010, following the move.

Worries in Asia escalated after North Korea said it had successfully carried out an underground hydrogen bomb test. The news came after a 5.1 magnitude tremor was detected close to the nuclear test site at Punggye-ri, which monitors said was unlikely to be natural.

A further decline in oil prices also continued to hurt sentiment, with Brent crude down 5.4% to $34.55 per barrel and West Texas Intermediate down 4.6% to $34.36 per barrel at 1652 GMT.

Across the Atlantic, US employers added 257,000 jobs in December compared with a downwardly-revised tally of 211,000 jobs in October and expectations for a 200,000 gain, the ADP private payrolls report revealed. The report comes ahead of the official monthly non-farm payrolls report on Friday.

Markit's US PMI on services was revised higher to 54.3 in December from 53.7, beating forecasts for a reading of 54.

However, ISM's index on services fell to 55.3 in December from 55.9 the previous month, missing estimates for a reading of 56.

US factory orders fell 0.2% in November, in line with expectations, compared to October's 1.5% increase.

After the closing bell, the Federal Reserve will publish minutes of its 15-16 December policy meeting, which will reveal more details behind the central bank's decision to raise interest rates for the first time in almost a decade.

Fed vice chairman Stanley Fischer told CNBC on Wednesday that the market's expectation that the central bank will only raise interest rates twice in 2016 are too low. The Fed sees four rate hikes this year but Fischer said this was more "in the ballpark", adding that it will depend on economic developments.

On the company front, mining stocks were under the cosh amid woes in China. Rio Tinto, BHP Billiton, Antofagasta and Glencore were in the red.

Oil producers, including Tullow Oil, Nostrum Oil & Gas and Ophir Energy, slipped on fears about the decline in oil prices.

BAE Systems jumped after RBC Capital Markets upgraded it from 'outperform' to 'top pick', and raised the target price from 570p to 630p, saying the tide has turned for US defence spending.

Royal Mail gained after Barclays upgraded the stock to ‘overweight’ from ‘equalweight’ and lifted the price target to 575p from 440p.

HSBC declined as JPMorgan Cazenove downgraded the bank to 'underweight' from 'neutral'. It believed the it underperforms by comparison to peers due to the increasing probability of worsening credit in emerging markets.

Market Movers

FTSE 100 (UKX) 6,066.08 -1.16%
FTSE 250 (MCX) 17,058.98 -0.85%
techMARK (TASX) 3,200.33 -0.40%

FTSE 100 - Risers

BAE Systems (BA.) 511.00p 3.44%
Kingfisher (KGF) 338.00p 3.14%
Worldpay Group (WI) (WPG) 309.80p 1.84%
Imperial Tobacco Group (IMT) 3,602.50p 1.79%
National Grid (NG.) 950.00p 1.79%
Randgold Resources Ltd. (RRS) 4,331.00p 1.74%
Royal Mail (RMG) 443.00p 1.33%
Marks & Spencer Group (MKS) 438.70p 0.85%
BT Group (BT.A) 467.35p 0.62%
British American Tobacco (BATS) 3,728.00p 0.51%

FTSE 100 - Fallers

BHP Billiton (BLT) 709.40p -4.91%
Rio Tinto (RIO) 1,846.50p -4.80%
Anglo American (AAL) 269.95p -4.68%
Sports Direct International (SPD) 533.00p -3.44%
Standard Chartered (STAN) 515.60p -3.14%
Antofagasta (ANTO) 433.20p -3.07%
ARM Holdings (ARM) 974.00p -2.99%
Prudential (PRU) 1,432.00p -2.98%
GKN (GKN) 285.20p -2.93%
Ashtead Group (AHT) 1,066.00p -2.83%

FTSE 250 - Risers

Marshalls (MSLH) 339.20p 5.74%
Bodycote (BOY) 578.50p 3.21%
Euromoney Institutional Investor (ERM) 1,025.00p 2.60%
Ladbrokes (LAD) 123.10p 2.41%
Brewin Dolphin Holdings (BRW) 310.80p 2.37%
Moneysupermarket.com Group (MONY) 371.00p 2.23%
JD Sports Fashion (JD.) 1,033.00p 1.77%
Ocado Group (OCDO) 289.30p 1.65%
Wizz Air Holdings (WIZZ) 1,813.00p 1.63%
Dechra Pharmaceuticals (DPH) 1,074.00p 1.61%

FTSE 250 - Fallers

Tullow Oil (TLW) 152.70p -7.12%
Nostrum Oil & Gas (NOG) 374.50p -6.26%
Vedanta Resources (VED) 260.20p -5.38%
Ophir Energy (OPHR) 92.10p -5.15%
Cairn Energy (CNE) 146.80p -5.11%
B&M European Value Retail S.A. (DI) (BME) 266.70p -5.09%
Jimmy Choo (CHOO) 131.00p -5.07%
OneSavings Bank (OSB) 313.00p -4.46%
Home Retail Group (HOME) 133.20p -4.38%
Telecom Plus (TEP) 974.50p -4.37%