London stocks slip after global rally pauses

FTSE 100, FTSE 250 down 0.3%

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Vodafone up on report Swisscom weighing Vodafone Italy bid

Dec 21 (Reuters) - British shares slipped on Thursday as a recent global equity rally spurred by hopes of interest rate cuts from major central banks came to an abrupt halt after Wall Street indexes closed sharply lower in the previous session.

Both the blue-chip FTSE 100 and FTSE 250 midcap index eased 0.3%.

UK stocks outperformed their European peers on Wednesday following a surprise drop in domestic inflation but snapped a three-day winning streak on Thursday.

Global markets had rallied since last week when the Federal Reserve hinted it could look at rate cuts next year. All three major U.S. stock indexes closed down more than 1% on Wednesday before rallying again on Thursday.

Personal goods was the worst performing sector, down 3.2% to touch a three-week low, while a 0.6% rise in automobiles and parts shares 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.

"In an ideal world, growth would enable the country to pay down the debt whilst improving public services and cutting taxes. But meaningful growth has proved elusive which suggests tough decisions are ahead for this chancellor or the next," said Danni Hewson, head of financial analysis at AJ Bell.

In the United States, a Commerce Department report showed the final gross domestic product (GDP) estimate for the third quarter stood at 4.9%, compared with previous estimates of 5.2%.

Among individual stocks, Vodafone gained 2.3% after a report that Swisscom is weighing a bid for Vodafone Italy early next year.

Harbour Energy led midcap gains, closing 23% higher after it agreed to acquire Wintershall Dea's non-Russian oil and gas assets.

Shares in British American Tobacco, Halma and United Utilities Group fell between 0.4% and 3.0% as their shares traded without the entitlement for a dividend.

Burberry was the biggest faller on the FTSE 100, down 4.2% after Morgan Stanley reduced its target price on the luxury retailer. (Reporting by Shashwat Chauhan and Shubham Batra in Bengaluru; Editing by Varun H K, Kirsten Donovan)