Sharecast - At 0835 BST, the FTSE 100 was down 0.1% at 7,410.11.
Figures released earlier by the Office for National Statistics showed that the economy contracted by 0.1% in May following 0.2% growth in April. Still, this was ahead of expectations for a 0.3% contraction.
The construction sector eased by 0.2%, following a fall of 0.9% in April - revised down from an earlier estimate of a 0.6% decline - while production output fell 0.6%. The dominant services sector stagnated, compared to a 0.3% uptick seen a month previously.
The services sector also showed no growth in the three months to May, while production grew by 0.4% and construction by 0.2%.
Overall, GDP was flat in the three months to May when compared to the three months to February.
Monthly GDP is now estimated to be 0.2% above pre-pandemic levels in February 2020.
ONS director for economic statistics, Darren Morgan, said: "GDP fell slightly as manufacturing, energy generation and construction all fell back with some industries impacted by one fewer working day than normal.
"Meanwhile, despite the coronation Bank Holiday, pubs and bars saw sales fall after a strong April. Employment agencies also saw another poor month.
"However, services were flat overall with health recovering, with less impact from strikes than in the previous month, and IT also had a strong month.
"Across the last three months as a whole the economy showed no growth."
Capital Economics said: "Overall, the bank holiday and strikes make it hard to judge the true health of the economy. But our sense is that underlying activity is still growing, albeit at a snail’s pace.
"We suspect that real GDP rose by around 0.1% q/q in Q2 as a whole, but that the effect of the further surge in mortgage rates since mid-June will contribute to GDP falling in Q3 and a mild recession beginning. That may not prevent the Bank from raising interest rates from 5.00% now to 5.25% or 5.50%, but it may mean rates don’t rise as far as the 6.00-6.25% priced into the market."
In equity markets, housebuilders were under the cosh, with Barratt Developments (LON:BDEV), Taylor Wimpey (LON:TW), Persimmon (LON:PSN), Bellway (LON:BWY), Crest Nicholson (LON:CRST) and Redrow (LON:RDW) all lower. The sector was hit by a disappointing update from Barratt - which forecast a more than 20% drop in home completions - and the latest survey from the Royal Institution of Chartered Surveyors (RICS), which showed that new house buyer inquiries fell to an eight-month low in June amid rising mortgage rates.
British American Tobacco (LON:BATS), FirstGroup (LON:FGP) and Supermarket Income REIT fell as they traded without entitlement to the dividend.
On the upside, Watches of Switzerland surged as it posted a big increase in full-year sales and profits.
Dr Martens (LON:DOCS) rallied as the bootmaker said trading since the start of the current financial year had been in line with expectations, adding that progress had been made rectifying the US warehousing fiasco that led to a series of profit warnings.
Diploma (LON:DPLM) gained after saying it had bought DICSA, a distributor of fluid power solutions into the European Seals aftermarket for £170m and that current trading was in line with expectations.
Softcat was boosted by an upgrade to ‘buy’ at Citi.
Market Movers
FTSE 100 (UKX) 7,410.11 -0.08%
FTSE 250 (MCX) 18,574.06 -0.03%
techMARK (TASX) 4,370.51 -0.26%
FTSE 100 - Risers
Prudential (LON:PRU) 1,075.00p 1.46%
BT Group (LON:BT.A) 126.55p 0.80%
Burberry Group (LON:BRBY) 2,106.00p 0.77%
Endeavour Mining (EDV (LON:EDV)) 1,886.00p 0.69%
JD Sports Fashion (JD.) 151.05p 0.60%
Smurfit Kappa Group (CDI) (SKG) 2,812.00p 0.57%
Fresnillo (LON:FRES) 636.80p 0.57%
Diageo (LON:DGE) 3,328.00p 0.51%
Haleon (LON:HLN) 314.70p 0.51%
SSE (LON:SSE) 1,781.50p 0.51%
FTSE 100 - Fallers
Barratt Developments (BDEV) 397.80p -4.83%
Taylor Wimpey (TW.) 101.70p -3.00%
Persimmon (PSN) 1,030.50p -1.95%
British American Tobacco (BATS) 2,544.50p -1.79%
St James's Place (STJ) 1,084.00p -1.72%
Berkeley Group Holdings (The) (BKG) 3,984.00p -1.36%
Melrose Industries (LON:MRON) (MRO) 486.50p -1.32%
Legal & General Group (LGEN) 226.40p -1.09%
Rolls-Royce Holdings (LON:RR.) 147.15p -0.88%
Smith & Nephew (SN.) 1,167.50p -0.85%
FTSE 250 - Risers
Watches of Switzerland Group (WOSG) 690.00p 7.56%
Diploma (DPLM) 3,102.00p 4.66%
Softcat (SCT) 1,446.00p 4.25%
Dr. Martens (DOCS) 131.20p 3.72%
Genus (LON:GNS) 2,458.00p 3.19%
Molten Ventures (GROW) 270.20p 2.74%
Domino's Pizza Group (DOM) 300.40p 2.67%
Pacific Horizon Inv Trust (PHI) 563.00p 2.55%
Ferrexpo (LON:FXPO) 93.95p 1.79%
Liontrust Asset Management (LON:LIO) 724.50p 1.47%
FTSE 250 - Fallers
FirstGroup (FGP) 144.50p -2.36%
Redrow (RDW) 444.20p -2.33%
PureTech Health (PRTC) 220.00p -2.22%
Bellway (BWY) 1,989.00p -2.02%
Crest Nicholson Holdings (CRST) 184.80p -2.01%
Supermarket Income Reit (SUPR) 73.80p -1.86%
Mitie Group (LON:MTO) 97.70p -1.81%
Carnival (NYSE:CCL) 1,269.50p -1.78%
Pagegroup (PAGE) 428.80p -1.74%
Tyman (TYMN) 254.50p -1.74%