London stocks pare gains after US data, assess strong earnings

(Reuters) -British equities closed modestly higher on Tuesday, led by a slew of upbeat corporate results, while investors assessed weaker-than-expected U.S. economic data ahead of a Bank of England rate decision later this week.

The blue-chip FTSE 100 shed some earlier gains after data showed U.S. services sector activity unexpectedly flatlined in July, highlighting uncertainty over the impact of U.S. President Donald Trump's tariff policy on businesses. The benchmark index ended up 0.1%, while the domestically focused midcap FTSE 250 rose 0.2%.

According to a survey on Tuesday, British businesses recorded their largest drop in new orders in almost three years in July and cut staff at the fastest pace in six months, adding to the Bank of England's growth concerns.

The BoE is widely expected to cut interest rates to 4% on Thursday from 4.25%, its fifth cut in the current cycle, though some policymakers may vote to keep rates on hold due to inflation climbing above its 2% target.

In the market, Diageo climbed 4.9% and was among the top gainers in the FTSE 100, after the world's largest spirits maker forecast stable 2026 sales despite tariff impacts and upped its cost-savings target.

The medical equipment and services subindex led sectoral gains, up 11.3%, hitting its highest level since November 2021, after Smith+Nephew's rise in first-half profit and announcement of a new $500 million share buyback.

The British medical products maker gained the most on the FTSE 100, up 15.3%.

BP added 2.8% after the oil giant said it would review assets and costs in order to improve profitability, with second-quarter profit beating expectations.

Fresnillo surged nearly 6% after the miner reported positive first-half results. Precious metal miners rose 2.4% tracking higher gold prices. [GOL/]

Travis Perkins was among the top gainers on the FTSE 250, up 5.6%, after the British building materials supplier said it expects to deliver full-year adjusted operating profit, including property gains, broadly in line with market expectations.

Conversely, Domino's Pizza Group fell 17.6%, hitting its lowest in over 10 years, after it cut its annual core profit forecast.

(Reporting by Sanchayaita Roy in Bengaluru; Editing by Vijay Kishore, Alexandra Hudson)