In his Autumn Statement, the Office for Budget Responsibility's growth expectations were cut to a contraction of 0.1% for this year, followed by downward revisions for every year of the forecast.
However, the FTSE-100 index was up as America's Dow Jones industrial average made early-session gains amid hopes for more economic stimulus measures in China helped boost confidence in London.
The pound was up against the US dollar and euro at 1.61 and 1.23 respectively ahead of expectations the Bank of England will hold back from any further quantitative easing today.
In London, Tesco was one of the session's biggest risers as investors breathed a sigh of relief after chief executive Philip Clarke signalled an end to the grocer's disastrous US venture. The group has invested £1 billion in Fresh & Easy since its launch in 2007, but it has never made a profit and lost £74 million in the last half-year.
With the sale of the business now on the cards after Mr Clarke announced plans for a strategic review, shares in Tesco jumped 10.8p to 337.45p, a rise of 3.3%.
Miners propped up the top flight as worries receded over whether US political leaders will reach a budget deal before the end of the year.
Kazakhmys topped the risers board, up 4%, or 26.5p, to 740.5p, while Anglo American was 43p higher at 1780p and Rio Tinto added 95.5p to 3226p.
However, shares in Sage dropped after the small business accountancy software company reported a 4% rise in full-year underlying profits to £356.3m. Chief executive Guy Berruyer described the performance as solid in the context of current market conditions, but added that the company remained watchful of the trading environment in Europe.
His caution was reflected in the Sage share price, which fell 3%, or 10.8p, to 300.4p.
Bank of America upgraded Argos and Homebase owner Home Retail Group to a buy rating and said it now expected slightly stronger underlying sales from the catalogue business, albeit with margins remaining under pressure due to promotional activity.
The shares leapt 7.7p to 121p, although the optimism was not shared at B&Q rival Kingfisher, which declined 2.9p to 271p.
Among other retail stocks, JD Sports Fashion rose 8%, or 55p, to 750p. The biggest Footsie faller apart from Sage was Tullow Oil, off 38p at 1254p.
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