FTSE falls on grim manufacturing data

Investors' sentiment dampened in London in early trading as negative factory figures from China put the brakes on yesterday's market rises.

The gains were fuelled by central banks moving to stimulate credit.

China's factory sector shrank in November for the first time in three years in the face of weakening demand both at home and abroad, sparking fears that global growth was hitting the buffers.

In a domestic blow Britain's manufacturing sector shrank for a second successive month in November and at its fastest pace since June 2009 as output and orders fell on weak global demand, according to a report by PMI.

The Federal Reserve and central banks including Britain's yesterday acted jointly to provide cheaper dollar funding to European banks, which have been crippled by the sovereign debt crisis.

But a five year Spanish bond auction launched with yields at 5.544 per cent laid bare the continuing woes of the Eurozone. The last five year auction had a yield of 4.782 per cent.

Banks, which gained yesterday after the move by central banks to free up credit, started on the back foot.

Lloyds was down 0.9 per cent, Barclays one per cent. But RBS edged up by a slim 0.5 per cent along with HSBC.

Miners, who rely on strong growth in China to stimulate commodity demand, were down as a sector.

Vedanta and Antofagasta both slipped by more than two per cent.

Engineer IMI was the biggest faller on the index, down 2.8 per cent while GKN was down more than two per cent.

That drop came as it announced that it had sold its aerospace engineering services unit.

On the up side B&Q owner Kingfisher was the highest climber, up 2.9 per cent after announcing a 14 per cent rise in third quarter profits.

Other risers included engineer Amec, up 1.6 per cent, and security giant G4S which rose by 1.3 per cent.

In Asia the Nikkei closed up 1.9 per cent and the Hang Seng 5.6 per cent

Across the Atlantic US November ISM manufacturing data is due for release.