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LONDON (Alliance News) - The FTSE 100 fell back to its mid-January levels Tuesday after Greek representatives failed to produce a new proposal in the emergency Eurogroup meeting and resource stocks fell after a drop in commodity prices.

Greece is now expected to submit a new bailout proposal on Wednesday, EU diplomats said during crisis talks in Brussels with the country's new finance minister. Greek Finance Minister Euclid Tsakalotos held hastily convened talks with his 18 Eurogroup colleagues after a referendum in which Greeks rejected austerity measures proposed by the country's creditors.

EU leaders are scheduled to hold an emergency summit later in the day. In addition, Greek Prime Minister Alexis Tsipras is to address a plenary session of the European Parliament in the French city of Strasbourg on Wednesday, the plenary's president Martin Schulz said on Twitter.

"It is still just about possible to imagine some sort of agreement coming together which would keep Greece inside the currency union, in the short term at least," said Jonathan Loynes, Chief European Economist at Capital Economics.

"It would presumably lie somewhere between the creditors' last offer - rejected by the Greek public in last weekend's referendum - and the latest counter-offer advanced on June 30th by Tsipras," he added. However, Loynes said it might very soon be time to accept the inevitable and refocus efforts on how best to manage the Grexit.

The FTSE 100 closed down 1.6%, at 6,432.21, its lowest level since January 15. It also marks the blue-chip index's third successive session in the red. The FTSE 250 closed down 1.3% at 17,212.93, its lowest close since early April. The AIM All-Share closed down 1.1% at 750.21.

European stocks ended worse off, with the French CAC 40 down 2.3% and the German DAX 30 down 2.0%.

On Wall Street at the London close, the DJIA and S&P 500 were both down 1.1% and the Nasdaq Composite was down 1.6%.

London stock indices were pushed lower by the heavily weighted resource sector as commodity prices tumbled. Analysts noted that the recent turbulence in the Chinese stock market has caused a drag on copper and other metal prices, whilst the strength of the dollar has caused the price of gold to slump.

"The ongoing volatility in mainland Chinese equities is spreading to other markets. Almost a third of all listed firms on China's mainland exchanges have suspended trading, leaving investors no choice but to sell Chinese index futures, commodities and Hong Kong-listed China H shares," said Jasper Lawler, market analyst at CMC Markets. "UK stocks sunk on Tuesday with China-sensitive mining stocks and energy companies leading the declines."

Crude oil prices also slipped lower, with Brent oil falling to a low of USD55.08 a barrel, its lowest level since the beginning of April. Similarly, US benchmark West Texas Intermediate fell to a low of USD50.56 a barrel.

"The vicious sell-off has been driven by a number of factors, not least the technical breakdown that resulted at the end of last week when Brent took out key support at USD61.30 and WTI USD56.50," said Fawad Razaqzada, technical analyst at FOREX.com.

"The main reason why prices have fallen this dramatically in my view is because of optimism that a nuclear deal with Iran will be reached soon which would allowed it to eventually add up to 1 million barrels of oil per day in the already-saturated market. That would be significant, make no mistake about it."

Anglo American closed as the worst performer in the FTSE 100, down 5.8%, hitting a low of 832.30p, its lowest level since February 2003. Glencore closed down 5.7%, having touched an all-time low earlier in the day, while Fresnillo ended down 4.6%. In the FTSE 250, KAZ Minerals closed down 7.5%, making it the worst performer, followed by Tullow Oil, down 7.2%, and John Wood Group, down 6.9%.

Land Securities was among the handful of gainers in the blue-chip index, up 2.2% after UBS upgraded it to Buy from Neutral. The Swiss investment bank said the commercial real estate investment trust's shares trade at a discount, presenting an attractive investment opportunity. However, UBS said it still prefers rival British Land Co, given its higher leverage and more development optionality. British Land closed up 0.9%.

The UK Competition and Markets Authority published its provisional findings following a year-long investigation into the energy market, finding that a range of problems have hindered competition in the market and proposing a series of potential remedies to the issues it has identified.

The CMA said regulatory interventions made to simplify prices are not having the desired impact of increasing engagement among customers and have limited discounting and reduced competition. The regulator, therefore, proposes that the retail energy market should be based on "clear principles that allow the benefits of competition to be gained and promote measures."

In addition, it will consider whether safeguards, such as a transitional price cap on the most expensive tariffs, will be needed to protect consumers until other measures drive a more competitive market.

The findings weighed on energy providers Centrica, down 2.8% and SSE, down 1.7%.

Online retailer ASOS ended down 0.1% despite reporting growth in sales in the first four months of the second half of its financial year in both its UK and international businesses and saying that sales for the full year should be at the higher end of its guided growth range, as it raised its pretax profit guidance.

The online fashion retailer said that total retail sales in the four months to June 30 grew 20% on the same period the year before, with UK sales rising 27% and international revenue up 16%, all at actual currency rates. It said that the rise in international sales, which improved on a 1% decline in the comparative period, benefited from price investments which it is making to try to turn that part of the business around.

In the economic calendar Wednesday, the UK Budget report is at 1330 BST and US EIA Crude Oil stocks is at 1530 BST. After the close of European equity markets, the US Federal Reserve will release its minutes from its latest policy meeting at 1900 BST.

In the UK corporate calendar, there are full-year results from software company Micro Focus International and property company Daejan Holdings. Housebuilder Galliford Try issues trading updates, as does food wholesaler Booker Group and student accomodation developer and manager Unite Group. Great Portland Estates releases a first quarter trading statement.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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