UK stocks finished lower on Tuesday as slower-than-anticipated services sector growth in China intensified anxieties over global economic momentum and clouded the outlook. The downbeat data also pressured the British pound.

The export-heavy FTSE 100 closed down 0.2%, giving up early gains, while the more domestic-focused FTSE 250 also dropped 0.2%. Against the US dollar, sterling fell 0.5% to below $1.26.

The moves came after Chinese PMI figures showed the vital services sector expanded at the weakest pace in four months during August. Forward-looking new orders also slipped back into contraction.

The disappointing data compounded recent signs of faltering recovery in the world’s number two economy. This sparked renewed fears over the health of global demand.

“The poor China PMIs highlight just how fragile the region’s second-biggest economy remains, seriously denting hopes for a rebound,” said ActivTrades’ Ricardo Evangelista.

There are mounting worries that China’s problems may have a “domino effect” on other major economies, stoking safe-haven dollar demand, Evangelista added. The downbeat services figures came despite authorities’ efforts to boost growth through stimulus measures.

In the UK, oil major BP outperformed, rising 2% after Saudi Arabia and Russia extended supply cuts until year-end. This lifted the Brent crude price back above $90 per barrel.

But industrial equipment rental firm Ashtead lost 2.6% despite reporting strong first-quarter results. It lowered its UK rental revenue growth guidance amid expectations for softer market conditions.

In the mid-cap FTSE 250, online trading platform CMC Markets dropped 4% after Peel Hunt downgraded its rating to “add” from “buy” due to the uncertain outlook.

North Sea focused oil producer EnQuest dived 11% following a 38% first-half profit slump attributed to lower energy prices. It also confirmed plans to delist from Sweden’s Nasdaq exchange.

For the pound, the downbeat China figures compounded worries that major economies are losing momentum amid elevated inflation and tighter monetary policy. This spells further pain for the UK currency.

Sterling has already come under heavy pressure after soft domestic PMI data indicated contraction this month. Surging inflation above 10% has severely eroded consumer spending power, curbing growth.

With recession risks mounting, the bleak outlook suggests both the British economy and the pound face further challenges in the coming months.