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(Alliance News) - European markets opened in the red on Tuesday, after a weak performance from Asian equities, after the Bank of Japan tightened monetary policy slightly.
The FTSE 100 index opened down 45.50 points, 0.6%, at 7,315.81. The FTSE 250 was down 183.26 points, 1.0%, at 18,465.70, and the AIM All-Share was down 2.66 points, 0.3%, at 820.88.
The Cboe UK 100 was down 0.7% at 731.68, the Cboe UK 250 was down 1.3% at 15,915.22, and the Cboe Small Companies was up 0.2% at 12,872.89.
"A sackful of concerns about the prospects for global growth are still being lugged around by investors and are weighing down sentiment on financial markets. The Wall Street sell-off has continued as recession worries prove hard to shake off, while the surge of Covid infections across China is spreading more unease," said Hargreaves Lansdown's Susannah Streeter.
In New York on Monday, the Dow Jones Industrial Average closed down 0.5%, the S&P 500 down 0.9% and the Nasdaq Composite down 1.5%
In European equities early Tuesday, the CAC 40 in Paris was down 1.3%, while the DAX 40 in Frankfurt was down 1.0%.
In much-needed positive news for equity markets, factory gate inflation in Europe's largest economy slowed on an annual basis in November, with prices dropping from the month before.
According to Destatis, the German producer price index fell 3.9% month-on-month in November, compared to a 4.2% fall in October from September. This was a sharper fall than expected, with FXStreet-cited consensus of a 2.6% decline.
On an annual basis, producer price inflation slowed to 28.2% in November, from 34.5% in October.
Sterling was quoted at USD1.2145 early Tuesday, lower than USD1.2160 at the London equities close on Monday. The euro traded at USD1.0612, up from USD1.0608.
The dollar dropped to JPY132.73 versus JPY137.00 late Monday, after Japan's central bank tweaked its longstanding monetary easing programme.
"Markets have been shaken from their pre-festive low volatility torpor this morning, as the Bank of Japan announced a surprising change in its yield curve control policy," ING analysts explained.
After a two-day policy meeting, the bank said it will widen the band in which it would allow rates for 10-year Japan government bonds to move, saying it would "improve market functioning".
"The bank will expand the range of 10-year JGB yield fluctuations from the target level: from between around plus and minus 0.25 percentage points to between around plus and minus 0.5 percentage points," it said in a statement.
Few had anticipated the shift, with all 47 of the economists surveyed by Bloomberg ahead of the decision saying they expected no change in policy.
"If you thought the Fed and ECB were determined to deliver a lump of coal in everyone's stocks, BoJ Kuroda could be considered the Grinch that stole Christmas," said SPI Asset Management's Stephen Innes.
The Nikkei 225 stock index in Tokyo closed down 2.5%.
The Shanghai Composite fell 1.1%, while the Hang Seng index in Hong Kong was down 1.3%, as China's economic outlook continued to worsen.
The World Bank on lashed its growth forecast for 2022 and 2023, as the pandemic and weaknesses in the property sector hit the world's second largest economy.
In a statement, the institution slashed its forecast for China's economic growth in 2022 to 2.7% from the 4.3% predicted in June. It also revised its forecast for next year down to 4.3% from 8.1%.
Both figures are well below the central government's gross domestic product growth target of around 5.5% for 2022 a figure many analysts believe is now unattainable.
"Mass hospitalisations are likely to prompt a fresh bout of trepidation for consumers and businesses and constrain the Chinese economy further while the prospect of fresh supply chain snarl-ups could prolong the price pains being felt in countries around the world," HL's Streeter said.
The S&P/ASX 200 in Sydney closed down 1.5%.
Back in London, there was little in the way of corporate news to sway the FTSE 100. Most of its constituents were in the red, with the worst performers being Ocado, down 3.8%, Sage, down 3.6%, and Segro, down 3.2%.
Bunzl lost 1.1%, as it announced four acquisitions and the disposal of its UK Healthcare division.
Bunzl acquired a New Zealand-based opthamology product distributor, and agreed to acquire a Aussie distributor of medical technology devices, as part of its expansion of its healthcare business in the region. It completed the acquisition of a Czech personal protection equipment distributor, and a Danish packaging products distributor. Bunzl also said it has agreed to sell its UK healthcare division to Mediq.
No financial details for the deals were provided.
"Together, these transactions are expected to be profit neutral to the group and will generate a small cash inflow. They reflect Bunzl's ongoing discipline around returns-focused capital allocation and portfolio optimisation," the distribution services company said.
Among London's mid-cap stocks, AG Barr lost 0.4%.
The soft drinks maker said it has acquired the remaining 38.2% stake in Moma Foods from its founder Tom Mercer alongside other minority shareholders, for GBP3.4 million. It had acquired 61.8% back in December of last year, as well as an option deed outlining a path to full ownership over the following three years.
Moma will remain as a standalone, supported business unit within the firm.
On AIM, Velocity Composites surged 67%.
The composite material kit supplier announced a five-year work package agreement with GKN Aerospace in the US, which it expects to be worth over USD100 million in revenue over five years.
To support its expansion, Velocity said it will develop its first "advanced" manufacturing facility outside of the UK in the US state of Alabama.
For the financial year that ended October 31, the firm estimates sales to be GBP11.9 million, compared to GBP9.8 million the year before. Its loss before interest, tax, depreciation and amortisation is expected to have remained unchanged at GBP500,000.
Gold was quoted at USD1,796.78 an ounce early Tuesday in London, higher than USD1,787.77 late on Monday, while Brent oil fetched USD79.59 a barrel, little changed from USD79.85.
Still to come on Tuesday's economic calendar, there is flash EU consumer confidence at 1500 GMT.
By Elizabeth Winter, Alliance News senior markets reporter
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