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(Alliance News) - The FTSE 100 quickly gave back its start-of-week gains as fears grew over China's spiralling Covid outbreak, with miners weighing on London's blue-chip index on worries that industrial demand will be dented by lockdowns in the world's second largest economy.
Meanwhile, the pound failed to get a boost after data showed the UK labour market continued to recover at the start of 2022, with the unemployment rate hitting its pre-virus level.
The jobless rate in the three months to January was 3.9%, down from 4.1% in the three months to December. The Office for National Statistics said the number of payrolled employees in February stood at a record 29.7 million.
Sterling was quoted at USD1.3023 following the UK jobs data, lower than USD1.3059 at the London equities close on Monday.
"This morning's UK jobs report for the month of February continued to signal tightness in the labour market and accelerating wage-growth dynamics, which support the prospect of another hike by the Bank of England on Thursday," said ING.
The FTSE 100 index was down 96.97 points, or 1.4%, at 7,096.50 early Tuesday. The mid-cap FTSE 250 index was down 284.39 points, or 1.4%, at 20,186.86. The AIM All-Share index was down 10.83 points, or 1.1%, at 989.08.
The Cboe UK 100 index was down 1.4% at 706.32. The Cboe 250 was down 1.4% at 17,830.19, and the Cboe Small Companies down 0.3% at 14,496.34.
In mainland Europe, the CAC 40 in Paris and the DAX 40 in Frankfurt were both down 1.7% early Tuesday.
Sentiment in Europe was dented, and miners dragging on London's FTSE 100 index, as Covid cases continue to surge in China.
China reported 5,280 new Covid-19 cases on Tuesday, more than double the previous day's tally, as the highly transmissible Omicron variant spreads across a country that has tethered itself tightly to a "zero-Covid" strategy.
Shenzhen – the southern tech hub of 17.5 million people – is three days into a lockdown with many factories closed and supermarket shelves emptying, while China's largest city Shanghai is under a lattice of restrictions that fall short of a citywide shutdown. At least 13 cities nationwide were fully locked down on Tuesday, and several other cities had partial lockdowns.
Stock prices in China tumbled on Tuesday. The Shanghai Composite ended down 5.0%, while the Hang Seng index in Hong Kong tumbled 5.7%.
In London, miners such as Glencore, Antofagasta and Rio Tinto were down 3.6%, 3.5% and 3.3%, respectively, on worries China's lockdowns could hit industrial demand.
Prudential, a life insurer focused on Asia and Africa, was down 5.5% in early trade, while emerging markets-focused lender Standard Chartered was down 3.9%. Both stocks also are listed in Hong Kong.
Another point of caution concerning China came from the Ukraine conflict, as pressure grows on Beijing to withdraw support from an isolated Moscow.
A series of powerful explosions rocked residential districts of Kyiv early Tuesday killing two people, just hours before talks between Ukraine and Russia were set to resume. Almost three weeks after vast columns of Russian forces marched across the border, Moscow's forces have bombarded and besieged several Ukrainian towns and cities - but Russia's military progress has been slow and costly, with Moscow apparently underestimating the strength of Ukrainian resistance.
"China is not a party to the crisis, still less wants to be affected by the sanctions," China's Foreign Minister Wang Yi said, according to a readout of a phone call with his Spanish counterpart Jose Manuel Albares published on Tuesday.
Wang's comments were published after a seven-hour meeting between high-ranking US and Chinese officials in Rome, at which Washington said the US had expressed concern about "alignment" between Russia and China.
Elsewhere in Asia on Tuesday, the Japanese Nikkei 225 index closed up 0.2%. The S&P/ASX 200 in Sydney closed down 0.7%.
Back in London, oil majors were also weighing on the FTSE 100 as crude prices retreated further from recent highs. Brent oil was trading at USD101.68 a barrel early Tuesday, falling from USD105.30 late Monday and now only barely above USD100.
"Hedge funds have reportedly massively cut their bullish oil bets last week, after seeing that the US and UK oil ban failed to push the prices above the USD130 per barrel mark - which came as a warning that the recent oil rally was perhaps overstretched," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
BP shares were down 2.7% in early dealings and Shell was down 1.5%.
Informa was one of just a handful of blue-chip stocks in the green in early trade, though up a meagre 0.2%. The business information publisher and events organiser swung back to profit in 2021, with the firm confident over the year ahead as Covid restrictions are relaxed.
Revenue for 2021 rose to GBP1.80 billion from USD1.66 billion the year before, with the firm swinging to a pretax profit of GBP137.1 million from a staggering loss of GBP1.14 billion in 2020.
"Through the 2021 transition year, as the world progressively began to start living alongside Covid-19, the group's focus gradually shifted from stability and security to revitalisation and growth," said Informa.
Tuesday's economic calendar has US producer prices at 1230 GMT.
The euro traded at USD1.0996 early Tuesday, firm against USD1.0991 late Monday. Against the yen, the dollar fell to JPY117.81 from JPY117.98.
Gold was quoted at USD1,933.99 an ounce, lower than USD1,957.83 on Monday.
By Lucy Heming; lucyheming@alliancenews.com
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