The FTSE 100 Index slipped more than 30 points as investors showed signs of jitters ahead of the Bank of England’s decision on interest rates.
A disappointed reaction to half-year results from drinks giant Diageo added to pressure on the top flight, which fell for a second successive session with a drop of half a percent or 32.3 points to 6020.
The main event of a busy session looked set to be the Bank’s decision on borrowing costs, with one economic forecaster seeing a 40% chance that policymakers will increase rates in order to curb inflation.
Diageo fell 5% or 58p to 1195p after its results came in short of expectations, even though chief executive Paul Walsh insisted “momentum was building” in the business, which sells Smirnoff vodka and Johnnie Walker whisky.
Investors were also concerned about the impact of continuing economic weakness in Europe, where Diageo’s net sales fell 3% in the half-year.
Rolls-Royce was also in the spotlight as underlying pre-tax profits rose 4% to £955 million in 2010, despite a hit of £56 million relating to the mid-air failure of one of its Trent 900 engines on a Qantas superjumbo.
The figures were better than expected but shares still retreated 9.5p to 646p.