A surprise drop in German factory orders was also dampening sentiment on the markets early on, raising investors’ concerns about the strength of the largest economy in the Eurozone. Orders fell 3.2% in June – their most since September 2011 – after a revised 1.6% slump in May.

Other economic data will also be closely watched today, including industrial production figures in the UK and the US trade balance.

Tracking a late sell-off on Wall Street on Tuesday, theFTSE 100 was down 0.5% at 6,647 in early trading – it has not closed below this level since mid-April.

“The natural conclusion that markets are drawing is a huge escalation in the Ukrainian crisis and the usual excuse of normal military exercises won’t wash this time, so expect markets to be highly on edge whilst the West tries to decipher Putin’s true intentions,” said Jonathan Sudaria, a dealer at Capital Spreads.

Russian troops

Reports on Tuesday evening said that Russia has significantly ramped up the number of troops on the eastern border of Ukraine in the last few days, raising fears of a potential invasion as Ukraine’s army continues to advance against pro-Moscow separatists.

The Financial Times cited senior Nato officials as saying that Russia has around 20,000 troops deployed in “battle-ready formations” on the border, more than the 15,000 US officials had estimated last week.

Meanwhile, markets were also reacting to reports that Russian President Vladimir Putin has ordered retaliatory measures against Western sanctions.

Ex-div stocks provide a drag

A number of heavyweight stocks were trading lower after going ex-dividend, including Anglo American, Reckitt Benckiser, Reed Elsevier, BP, Barclays and Glaxosmithkline.

Accounting software group Sage rose after appointing former Micro Focus boss Stephen Kelly as successor to longstanding chief executive Guy Berruyer.

Budget carrier Easyjet edged higher following the news that passenger numbers in July were 7.7% higher than last year. The stock was bouncing after a fall on Tuesday following reports that Russia was considering a ban on European airlines flying over Siberia in response to Western sanctions.

Ukraine-focused iron ore group Ferrexpo delivered a 65% increase in profits in the first half despite the wider geopolitical crisis, with its bottom line helped by the devaluation of the local currency.

Standard Chartered was making gains early on ahead of its interim results due out later in the session.

FTSE 100 – Risers
Sage Group (SGE) 374.20p +1.66%
ARM Holdings (ARM) 855.00p +1.66%
Carnival (CCL) 2,120.00p +1.44%
Vodafone Group (VOD) 198.50p +1.40%
Legal & General Group (LGEN) 233.90p +0.99%
Randgold Resources Ltd. (RRS) 5,045.00p +0.80%
Fresnillo (FRES) 932.50p +0.65%
HSBC Holdings (HSBA) 637.40p +0.54%
Standard Chartered (STAN) 1,222.50p +0.49%
BT Group (BT.A) 380.10p +0.45%

FTSE 100 – Fallers
Shire Plc (SHP) 4,720.00p -3.20%
Land Securities Group (LAND) 1,012.00p -2.03%
Smith & Nephew (SN.) 1,043.00p -1.97%
SABMiller (SAB) 3,158.00p -1.90%
AstraZeneca (AZN) 4,267.00p -1.81%
Reed Elsevier (REL) 934.50p -1.73%
Ashtead Group (AHT) 874.00p -1.52%
BP (BP.) 475.25p -1.46%
Anglo American (AAL) 1,551.50p -1.43%
United Utilities Group (UU.) 843.50p -1.40%

Source: ShareCast