Cautious trading has the Footsie mired in the red

The Thomson Holidays owner slumped by as much as 10 per cent as it revealed consumer nerves triggered a 2 per cent fall in UK bookings in the past three months.

Worries over the US Federal Reserve's policy meeting later in the day and the Bank of England's quarterly inflation report today also hit the wider market, with the FTSE 100 Index closing down 34.11 points to 5376.41.

America's Dow Jones Industrial Average and the tech-laden Nasdaq were both down around 1 per cent soon after Wall Street opened.

Asian markets had earlier reacted to a big drop in China's July

imports – a sign that the rapid expansion in the world's third largest economy is cooling – denting mining stocks.

But the main concerns focused on the Fed's statement and prospects for the world's biggest economy after chairman Ben Bernanke said a few weeks ago that the recovery's pace was "unusually uncertain".

Evidence that China's rapid growth is easing added to bearish sentiment in the US, helping the benchmark S&P 500 index to dip below its 200-day moving average.

The news about weaker-than-expected Chinese imports left commodity and energy stocks among the biggest decliners, with the S&P materials index down 1.6 per cent.

Aluminum company Alcoa fell 3.7 per cent to $11.23 and Exxon Mobil

dropped 1.1 per cent to $61.79.

News revealing the UK trade deficit narrowed only slightly in June failed to help the pound ahead of the Bank of England's report today.

Sterling slipped 0.8 per cent to just under 1.58 dollars, although it held firm at 1.20 euros.

Among stocks, TUI was 221/2p lower at 2031/8p as the travel giant said it had more cheap holidays to give away – squeezing profits – as the World Cup and sunny weather also gave the firm some headaches.

The news sent rival Thomas Cook down 7 per cent, or 145/8p to 1837/8p, in the FTSE 250.

TUI was joined on the way down by InterContinental Hotels, even though the Holiday Inn operator posted profits at the top end of hopes. Shares declined 46p to 1078p amid continued concerns over the slowing global economy.

International Power, which owns UK assets including the giant coal-fired station at Rugeley in Staffordshire, was another faller, down 73/8p to 3725/8p after confirming its merger with French giant GDF Suez.

The new company will be 70 per cent owned by GDF under the deal to

create one of the world's biggest independent power generators.

A host of heavyweight fallers in the mining sector also hindered

progress amid increasing worries over commodity demand following the slowdown in Chinese import growth.

Vedanta Resources was the sector's worst performer, losing 103p to 2480p.

Elsewhere, social housing firm Connaught clawed back some of its mammoth recent falls over the impact of spending cuts, warnings of huge losses and a possible debt for equity swap.

The stock saw a much-needed gain of 22 per cent, up 23/8p to 133/8p.

Shares in bakery chain Greggs went stale with an 115/8p fall to 4217/8p after saying the recent rise in wheat prices could squeeze margins, although customers are unlikely to see significant price hikes.

The biggest Footsie risers were GlaxoSmithKline up 25p to 1177p, Smiths Group ahead 24p to 1148p, Shire rising 27p to 1498p and AstraZeneca up 43p to stand at 3348p.