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LONDON (Alliance News) - UK stock indices ended lower Tuesday, as equity markets across Europe were hit when the EU Commission slashed its economic growth forecasts amid concerns about deficits and debts.

Oil-related stocks were the worst-performers on the London market as the oil price sunk to a new four-year low, but the UK indices still managed to outperform the major peers in continental Europe.

The FTSE 100 ended down 0.5% at 6,453.97, the FTSE 250 ended down 0.4% at 15,394.11, and the AIM All-Share ended down 0.8% at 714.31. However, the French CAC 40 ended down 1.5% and the German DAX down 0.9%.

The main US equity indices were also lower when the European equity markets closed, with the DJIA down 0.2%, the S&P 500 down 0.6%, and the Nasdaq Composite down 0.7%, as US voters headed to the polls in the US mid-term elections.

In its Autumn Economic forecast, the executive-arm of the EU slashed the growth and inflation forecasts for the euro area, citing the weak economy and slow improvement in the employment situation. The growth forecast for this year was cut to 0.8% from 1.2%, while the outlook for 2015 was cut to 1.1%, from the 1.7% growth the Commission had predicted in May. It is predicting 1.7% growth for 2016.

Economic activity should gradually strengthen over the course of 2015 and accelerate further in 2016, as the legacies of the financial crisis fade away, structural reforms start to bear fruit, and labor markets improve, the Brussels-based Commission said.

"The economic recovery is clearly struggling to gather momentum in much of Europe," said the EU's new economy commissioner, Pierre Moscovici.

Projections were lowered for all three of the eurozone's largest economies. Powerhouse Germany is now expected to see growth of only 1.1% next year - almost 1 percentage point less than previously thought - while France and Italy would reach only 0.7 and 0.6% respectively.

The only major EU economy to deliver higher-than-anticipated growth would be Britain, the Commission said, which is not a member of the eurozone. Neighbouring Ireland is registering the strongest growth overall, a year after leaving behind an international bailout.

Energy stocks were amongst the worst performers on the London market. Tullow Oil was the worst FTSE 100 performer, down 5.3%, with fellow clue chips BG Group, Petrofac, BP, and Royal Dutch Shell down 2.4%, 2.9%, 2.0%, and 2.7%, respectively. In the mid-cap FTSE 250 index, Afren, Ophir Energy, and AMEC were the three worst performers, down 7.3%, 6.1%, and 5.9%, respectively.

The FTSE 350 Oil Equipment, Services and Distribution index was the worst-performing sector index, falling 4.7%. The FTSE 350 Oil and Gas Producers index fell 3.0%.

The price of oil fell, with Brent Crude hitting a fresh four-year low of USD82.05 a barrel, after Saudi Arabia was reported to have cut the price it charges the US for oil while raising prices for Europe and Asia.

"The price cut was seen as further evidence of Saudi’s efforts to fight for market share in the world’s largest oil consumer while raising prices to Asia and Europe," says Numis analyst Sanjeev Bahl.

A Reuters report that European central bankers are planning to challenge European Central Bank president Mario Draghi on his leadership and communication style weighed further on stocks just ahead of the market close. According to Reuters, the bankers are particularly angered that Draghi effectively set a target for increasing the ECB's balance sheet immediately after the policy-making governing council explicitly agreed not to make any figure public, sources told the news agency. The ECB meets for its regular policy meeting on Thursday.

The UK construction PMI fell to 61.4 in October from 64.2 in September, missing expectations for a smaller fall to 63.5%. While the reading marked a four-month low, it also marks the 13th month of a figure above 60, which is seen as very strong.

The lower-than-expected reading briefly weighed on the pound, but it quickly recovered. At the time of the equity market close the pound was quoted at USD1.5998 and EUR1.2742.

Associated British Foods was the best performer in the FTSE 100, gaining 4.2% after reporting a higher pretax profit of GBP1.02 billion for its last financial year, up from GBP868 million last year, despite a drop in revenue to GBP12.94 billion, from GBP13.32 billion. The group's low-cost fashion chain Primark drove profit growth in the period, offsetting heavy profit falls in its struggling sugar business on the back of record low sugar prices. Analysts said the overall results were marginally ahead of expectations.

Imperial Tobacco Group gained 4.2% after reporting that its pretax profit rose to GBP1.52 billion from GBP1.22 billion in the last financial year, despite a fall in both volume and revenue, as it continued to strip out costs across the business as part of its cost optimisation programme. Last year's results were also knocked back by a GBP580 million impairment charge.

"We are a stronger business going into 2015. We've strengthened our brands and market footprint, increased cash conversion and considerably reduced our debt level," the company said in a statement.

Legal & General Group also had a strong session, closing up 2.0% after it reported a jump in net cash generation in the first nine months of the year, boosted by cash generation at the operating level, and said it had more than offset a drop in individual annuity sales since recent rule changes with higher sales of bulk annuity deals.

Rolls-Royce Holdings rose in afternoon trade, ending 1.4% higher after it said it will accelerate cost cutting, with 2,600 jobs to go over the next 18 months, primarily in its aerospace division. The engineering group also said it has appointed David Smith as its new chief financial officer, with immediate effect.

On Wednesday, Marks & Spencer Group will release interim results, along with FirstGroup and Wincanton. Interim management statements are scheduled from Meggitt, Alent, Old Mutual, JD Wetherspoon, Drax Group, and Esure.

The HSBC Chinese service sector PMI is due to be released overnight, while the morning economic focus will be on the Markit service sector PMI's for October from across the eurozone and the UK, as well as eurozone retail sales data.

By Jon Darby; jondarby@alliancenews.com; @jondarby100

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