By Sudip Kar-Gupta and Lionel Laurent
LONDON (Reuters) - Britain's top equity index slightly underperformed its euro zone peers on Wednesday as a survey of the dominant services sector came in sharply below forecasts.
The blue-chip FTSE 100 index (FTSE) was up 0.3 percent at 6,950.46 points at the close, compared with rises of 0.6 to 0.8 percent for the Paris CAC 40 (FCHI) and Frankfurt DAX (GDAXI).
While the UK data pointed to another subdued round of overall economic growth in the second quarter, retail stocks rose and energy shares got a lift from a low U.S. crude oil inventories figure.
"There's more potential in the UK than before the election...and although I have concerns over the sterling and the effects of a rate rise we should see a recovery in miners and UK banks throughout the year," said Arran Lamont, Chief Investment Officer at Kola Capital.
Property and utility stocks lost ground: British Land (L:BLND) fell 1.5 percent, real estate rival Land Securities (L:LAND) retreated 1.4 percent while utility National Grid (L:NG) was down 0.7 percent.
Traders said those sectors were being hit by a pick-up in British government bond yields (GB10YT=RR), which rose along with German bond yields following a surprise increase in European inflation data. Lingering uncertainty over Greece's debt problems were also impacting the credit market. [GVD/EUR]
"The market is showing some signs of nerves at the moment. In the long term, there's a lot of value in the FTSE, but it's looking a bit overbought at the moment," said Kyri Kangellaris, director at Horizon Stockbroking.
On the positive side, consumer goods group Unilever (L:ULVR) rose 2.2 percent after Barclays (LONDON:BARC) upgraded its rating on the stock to "overweight" from "equal weight", while plumbing supplies group Wolseley (L:WOS) rose 0.9 percent after posting higher profits.