British equities slipped on Thursday as a recent global rally supported by hopes of interest rate cuts from major central banks next year came to an abrupt halt, with Wall Street indexes closing sharply lower overnight.

The blue-chip FTSE 100 edged down 0.1% as of 0905 GMT, while the FTSE 250 midcap index lost 0.5%.

UK stocks had outperformed their European peers in the previous session following a surprise drop in domestic inflation, but are now set to end a three-day winning streak.

Global markets had rallied since last week when the Federal Reserve hinted it could look at rate cuts next year.

All three major US stock indexes closed down over 1% on Wednesday.

Personal goods and automobiles were amongst the top sectoral laggards, down 2.0% and 1.0%, respectively, while a 0.5% rise in industrial metal miners helped limit losses.

Britain ran up a higher-than-expected budget deficit in November and borrowing in previous months was revised higher too, underscoring the limited room for pre-election tax cuts by Prime Minister Rishi Sunak’s government.

London stocks set for weekly losses amid broad selloff

“The Chancellor will have an opportunity to loosen fiscal policy in March, when the next Budget will be held… we think that the Chancellor will be relatively restrained with pre-election bribes,” said Samuel Tombs, chief U.K. economist at Pantheon Macroeconomics.

Focus now shifts to the final estimate of U.S third-quarter GDP data due later in the day, and November Personal Consumption Expenditure index (PCE), the Fed’s preferred inflation gauge, due on Friday.

Among individual stocks, Vodafone gained 1.9% after report stated Swisscom is weighing a bid for Vodafone Italy early next year.

Shares in British American Tobacco, Halma and United Utilities Group fell between 0.6% - 2.4% as their shares traded without the entitlement for dividend.