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(Alliance News) -Â The FTSE 100 shed over 130 points on Tuesday as risk mood curdled ahead of the latest US Federal Reserve policy decision.
The risk-off mood spurred safe haven gold, leading London's precious metals miners to end the session higher, but this was more than offset by losses for oil majors and stocks exposed to the travel industry.
The FTSE 100 index closed down 136.87 points, or 2.1%, at 6,335.72. The FTSE 250 ended down 381.65 points, or again 2.1%, at 17,755.25, and the AIM All-Share 9.40 points, or 1.1%, at 883.49.
The Cboe UK 100 ended down 2.2% at 10,727.83, the Cboe UK 250 closed down 2.3% at 15,367.92, and the Cboe Small Companies ended down 0.9% at 9,872.93.
In European equities on Tuesday, the CAC 40 in Paris and DAX 30 in Frankfurt both closed down 1.6%.
"The stock market hot streak is over. After numerous hedge funds threw in the towel scrutinizing this historic stock market rebound, it seems now the financial markets are ready to focus on the economic recovery and when the Fed will contemplate the curtailment of the Covid-19 emergency programs," said Edward Moya at Oanda.
Moya said the Fed should be in a "holding pattern waiting to see how the economic recovery unfolds" when it announces its latest monetary policy decision.
The Federal Open Market Committee will conclude its two-day policy meeting on Wednesday and announce its decision at 1900 BST. This will be followed by a press conference with Fed Chair Jerome Powell at 1930 BST.
The CME's FedWatch tool prices in an 88% likelihood that the federal funds rate is kept on hold at 0.00% to 0.25%.
And most think this will be the case for quite some time.
The Fed should give some insight into its rate path with the latest forecast summary of projections, the so-called dot plot. These will be the first set of projections published since December. They are usually published once a quarter, but were suspended in March due to uncertainty created by Covid-19.
This week's dot plot is widely expected to show no rate hikes through the forecast horizon to 2022.
Stocks in New York were largely lower at the London equities close, with the Dow Jones down 1.0%, the S&P 500 index down 0.8%, and the Nasdaq Composite up 0.2%.
Oanda's Moya added: "Fading risk sentiment sent the Japanese yen, Swiss franc, and treasuries higher. Investors kept a close eye with the 10-year treasury yield as it was getting very close to 1% at end of last week."
Against the yen, the dollar was trading at JPY107.71, down compared to JPY108.61 late Monday. Fellow safe haven gold was quoted at USD1,718.42 an ounce at the London equities close Tuesday against USD1,691.14 at the close on Monday.
The bounce in gold prices led Fresnillo shares to close 3.8% higher in London and Polymetal International to gain 2.5%.
Elsewhere in the FTSE 100, stocks which have enjoyed a rebound in recent sessions after selling off sharply in the wake of Covid-19 ended in the red. Jet engine maker Rolls-Royce Holdings shed 7.1%, British Airways owner International Consolidated Airlines fell 6.2% and easyJet lost 3.0%.
Oil majors were lower as Brent gave back recent OPEC-driven gains.
The 13-member cartel and its allies, notably Russia, over the weekend decided to extend by a month deep May and June cuts agreed in April to boost prices, the Organization of the Petroleum Exporting Countries said in a statement. But Mexico, which had already made clear ahead of the talks that it "could not adjust...production further", announced that it would not be complying.
The North Sea benchmark hit a high of USD43.30 at the start of the week - its highest level in three months - though has slipped back since. Brent oil was quoted at USD40.56 a barrel at the London equities close Tuesday from USD41.14 late Monday.
David Madden at CMC Markets noted the bearish oil move "ties in with the wider risk-off sentiment."
Royal Dutch Shell 'A' and 'B' shares closed down 5.4% and 4.4% respectively, while BP declined 3.5%.
British American Tobacco ended down 3.2% after cutting revenue guidance.
The London and Johannesburg-listed tobacco firm said it continues to see "good" pricing and "strong" volumes, with "good" share growth across all its three new categories - vapour, tobacco heating and modern oral.
In developed markets - which accounts for 75% of group revenue - the company has seen "strong" results. In emerging markets, however, BAT noted the coronavirus pandemic has had a "more pronounced" negative effect.
As a result, BAT now expects about a 3% headwind to constant currency revenue in 2020 from the pandemic. The tobacco firm is now guiding for constant currency adjusted revenue growth between 1% to 3%, down from previous guidance of 3% to 5% growth.
AVEVA closed up 4.1% after the engineering & industrial software firm reported a sharp spike in annual profit driven in large part by a rise in Subscription revenue.
The Cambridge-headquartered company posted a GBP92.0 million pretax profit for its year ended March 31. This is almost twice the prior year's GBP46.7 million profit figure.
This resulted primarily from an 8.8% increase in AVEVA's revenue to GBP833.8 million from GBP766.6 million, thanks largely to a 45% increase in Subscription revenue to GBP316.8 million from GBP218.2 million. Maintenance revenue was up 3.8% at GBP201.7 million.
The pound was quoted at USD1.2742 at the London equities close Tuesday, higher compared to USD1.2689 at the close on Monday.
The euro stood at USD1.1359 at the European equities close Tuesday, up against USD1.1294 at the same time on Monday.
The eurozone economy contracted less sharply than initially estimated during the first three months of the year, but the decline remained the largest on record, Eurostat said.
On an annual basis, euro area gross domestic product fell 3.1% in the first quarter of 2020, after a 1.0% rise in the fourth quarter of 2019. The first-quarter reading was revised up from the preliminary figure of negative 3.2%.
Quarter-on-quarter, eurozone GDP in the first three months of 2020 fell 3.6% following a 0.1% rise in the fourth quarter. The first-quarter reading was revised up from the preliminary figure of negative 3.8%.
Both the annual and quarterly revised declines remained the largest since records began in 1995.
The economic calendar for Wednesday has Japanese producer prices at 0050 BST, Chinese inflation at 0230 BST and US inflation at 1330 BST.
The UK corporate calendar on Wednesday has half-year results from real estate company Shaftesbury and Paragon Banking and full-year results from property developer LondonMetric.
By Lucy Heming;Â lucyheming@alliancenews.com
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