A broker downgrade for UK house builders, some mixed economic data from China and wariness ahead of some key US jobs data undermined sentiment in early action, sending the FTSE 100 lower.
At 10:10 the FTSE 100 was off 16.38 points, or 0.25%, to 6,553.58.
UK housebuilders were pummelled after broker Jefferies issued downgrades for sector players. The broker says it fully expects lead indicators such as mortgage approvals, house price data and GDP to weaken in the first quarter, putting pressure on building stocks. Furthermore, it says, the May general election will see this uncertainty continue into second three months of 2015, undermining housebuilders' share prices.
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The broker's bearish conclusions on outlook for the sector mean that it is "no longer recommending investors buy any of the UK residential-linked shares under our coverage".
The impact of the downgrade on the housebuilding sector was immediate, with the likes of Taylor Wimpey (down 5%), Barratt Developments (down 4%) and Persimmon (4.2%) leading the retreat.
Overnight, official data revealed China's consumer inflation edged up slightly in December, but a further slide in factory prices raised new concerns over weak demand in the world's second-largest economy.
Investors are also exercising caution ahead of US employment figures for December. Michael Hewson, chief market analyst at CMC Markets, says expectations are high that the data will be positive, with around 240,000 jobs added during the month.
He adds: "An extremely positive number could cause some ripples particularly given the timing of a Fed rate hike, as it would suggest that any slack in the US labour market could disappear faster than anticipated, and risk the possibility of an earlier rate hike, despite this week's dovish Federal Open Market Committee minutes.
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