THE FTSE 100 Index dropped back from an 11-week high today after sentiment was hit by a heavy slump for energy services firm Petrofac.
Petrofac dived more than 15%, or 211p to 1177p, after it warned its 2014 net profit would fall by as much as 11% due to the poor performance in one of its divisions, wiping over £700 million off its value.
The fall in the FTSE 100 Index of 24.7 points to 6814.6 came despite more encouraging news from the UK economy, with factory output of 1.4% representing the best quarter for manufacturers since 1999. The trade deficit also narrowed in March.
However, this boost did not stop the pound falling back from four-year highs against the dollar to 1.68 as traders thought US assets now looked good value.
Sterling rose to 1.22 against the euro after European Central Bank president Mario Draghi's hint yesterday that the bank may ease its monetary policy next month.
The weakness in the FTSE 100 came despite an easing in China's inflation rate to 1.8%, a figure which should give leaders room to stimulate their slowing economy if needed.
International Airlines Group, which owns British Airways and Iberia, was another big faller, even though it reported narrower losses for the first quarter of the year.
BA cut its deficit for the seasonally quiet period to 5 million euros (£4 million), while the Spanish carrier continued to benefit from turnaround efforts as its loss fell to 111 million euros (£90.7 million).
Shares were initially higher but later stood 19.6p lower at 385p.
Engines giant Rolls Royce fell more than 1% after a downgrade by Barclays in which it warned that slow growth anticipated will continue for longer than expected. The broker cut its target price to 930p from 1225p, causing shares to fall 12p to 1001p.
Among other broker changes, banking giant Barclays was in focus after its announcement that it will take the axe to 19,000 jobs by 2016.
JP Morgan raised its price target to 305p from 285p and kept its rating at overweight, while Citi also put a 305p target on the shares, down a shade from 315p, but reiterated its buy rating. Citi said Barclays' revised strategy was sensible, although shares still slipped 0.9p to 261.6p.
The biggest top flight gain came from Marks & Spencer, which lifted 2% or 9p to 458.4p in a session when rival Next lost 15p to 6465p and FTSE 250 stock Debenhams improved 1.6p to 81.6p.
In the FTSE 250 Tullet Prebon was the biggest faller after the City broker posted sales 12% lower at £248 million.
The biggest risers on the FTSE 100 index were Intertek up 41p to 3027p, Unilever up 27p to 2639p, Diageo up 20p to 1850p and Pearson up 19p to 1137p.
AstraZeneca was down 112.5p to 4600.5p, Shire down 91 to 3309p and easyJet down 30 to 1685p.