Shares tread water ahead of US jobs data

Jonathan Loynes, chief European economist at Capital Economics said: 'The drop in the main business activity index to 51.3 from 53.1 leaves it at its lowest level since April last year and is consistent, on past form, with very little expansion – if any - in activity the biggest sector of the economy.'

While he believes the disappointing news this week still points to growth over the rest of the year he warned that if the surveys continue to weaken in the next few months 'the threat of a renewed contraction in Q4 and beyond would become very real indeed.'

With construction the main driver behind better than hoped for UK growth in the second quarter, today's data on new orders in the sector is also cause for concern.

Official statistics show construction orders dropped 14% in the second quarter compared to the previous quarter and were 9% lower year-on-year suggesting more pain ahead for the sector.

That dragged the pound more than half a cent off earlier highs against the dollar, to trade just 0.12% against the greenback at $1.5409.

The news was more mixed across the channel as service sector data showed a pick-up in the pace of growth but retail sales data showed growth is slowing.

In corporate news, BP said the cost of the cleanup operation in the Gulf of Mexico has risen to $8 billion.

Shares were 1.3p higher at 393.95p as the group's plan to dispose of non-core assets as it tries to build its balance sheet got a further boost after Russia's Gazprom said it would take a look at the group's assets in Azerbaijan if the group put them up for sale.

Banks remain in focus amid hopes the sector will continue to win the battle against new regulations as HSBC warned the UK government it is poised and ready to relocate if new rules are introduced which force it to split up its business. Shares added 2.7p to 654.7p