By Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- Shares of Diageo PLC led the FTSE 100 lower on Thursday after the drinks maker flagged volatile demand in emerging markets, while the broader U.K. market pared losses in afternoon action after robust U.S. growth data.

The FTSE 100 index lost 0.1% to 6,538.45, closing at the lowest since Dec. 18.

Diageo slid 4.7% after the drinks maker said demand had been volatile in emerging markets in the first half of the year, with sales in the Asia-Pacific region dropping 10%.

Johnson Matthey PLC gave up 0.5% after the chemicals company said Finance Director Robert MacLeod has been appointed chief executive, replacing Neil Carson, who is retiring after 10 years in the job.

On a more upbeat note, shares of Royal Dutch Shell PLC (RDSB) added 1.1% after the oil major said it would suspend drilling in the U.S. Arctic region. It also said fourth-quarter profit dropped 71%.

British Sky Broadcasting Group PLC gained 4% after the satellite-TV company posted a rise in first-half sales.

The London benchmark briefly jumped into positive territory in midday trade after shares of HSBC Holdings PLC (HSBC) spiked 10%, in what traders attributed to a "fat-finger" trade. HSBC shares closed 0.6% higher.

The broader U.K. market was hit at the open by a data report from China, which confirmed that the country's manufacturing sector contracted in January. The HBSC purchasing managers index fell to 49.5, down from a 50.5 reading in December.

Later in the day, the benchmark started paring losses after data showed the U.S. economy grew by a solid 3.2% in the final quarter of last year.

On the data front in the U.K., numbers from the Bank of England showed mortgage approvals in the U.K. rose in December to their highest level in almost six years, providing further evidence that the country's housing market continues to accelerate.

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