The U.K. FTSE 100 index (UK:UKX: news , chart , profile ) fell 2.1%, or 91.78 points, to 4,334.41. Other European shares fell and U.S. stock futures were pointing to a lower open on Wall Street. See Europe Markets. See Indications.
"Prices are increasingly factoring in the significant slowdown," noted William Davies, head of European equities at Threadneedle.
Mineral extractors fell sharply in London, with Rio Tinto (RTP:![]()
RTP 92.44, -7.67, -7.7%) (UK:RIO: news , chart , profile ) shares down 6.2%, Xstrata (UK:XTA: news , chart , profile ) shares down 6% and Lonmin (UK:LMI: news , chart , profile ) shares down 7.3%.
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Data out Tuesday showed that China's export growth contracted in December at its fastest pace in almost a decade.
December shipments fell 2.8% to $111.16 billion from a year earlier, its biggest contraction since April 1999 and following a 2.2% narrowing in November, data released by the General Administration of Customs showed Tuesday. See full story.
"Poor Chinese numbers are likely to pressure commodities and possibly equities," Dariusz Kowalczyk, chief investment strategist at SJS Securities, said. See Asia Markets.
Additionally, Rio Tinto announced further production cuts, suspending work on its $229 million underground development at the Northparkes copper and gold mine in New South Wales in Australia due to declining copper prices.
Copper futures fell another 6 cents to $1.43 a pound in Tuesday's electronic trading session, while oil futures fell $1.17 to $36.42 a barrel.
U.S. aluminum giant Alcoa (AA:![]()
AA 10.06, -0.75, -6.9%) , which detailed production cuts last week, said late Monday that it lost $1.2 billion, or $1.49 a share, in the fourth quarter of 2008. In the year-earlier period, the aluminum giant earned $632 million, or 75 cents a share. Sales fell to $5.7 billion, from $7 billion. See full story.
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Banks under pressure
Banks fell, with the sector unable to build on a strong session on Monday. Shares of Royal Bank of Scotland (UK:RBS: news , chart , profile ) (RBS:![]()
RBS 16.70, +0.54, +3.3%) dropped 7.6%, while Barclays (UK:BARC: news , chart , profile ) shares fell 12.1%..
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RBS may face losses of 2.3 billion pounds, or $3.5 billion, on its exposure to the bankrupt Lyondell Chemical stake. It's also going to sell its Bank of China stake, reports said on Tuesday.
"I am still underweight banks and I think that we haven't yet seen the next wave of bad debt problems arising from normal loans to normal people who are losing their jobs and finding it difficult to make mortgage payments and credit card payments," said Andrew Lynch, portfolio manager at Schroder Investment Management.
"From that perspective, I think that banks could continue to struggle for some time just because they face a difficult headwind of more writedowns to come," he added.
Hedge fund manager Man Group (UK:EMG: news , chart , profile ) shares fell 3.2% after it was downgraded to sell from hold by Citigroup, as the broker sees a high risk of profit taking at Man's key AHL fund.
Tesco sales up
However, shares of supermarket group Tesco (UK:TSCO: news , chart , profile ) advanced 2.4% as the company reported a 2.5% rise in U.K. comparable sales in the seven weeks to Jan. 10.
"This growth is against the background of challenging trading conditions in all of our markets caused by the global economic slowdown," the firm said. See full story.
Homebuilder Taylor Wimpey (UK:TW: news , chart , profile ) , down 14%, also flagged up difficult market conditions when it updated investors.
"We remain of the view that there will not be a recovery in the U.K. housing market in the short term," it said.
Taylor Wimpey's net private reservations for the second half of 2008 averaged around 137 per week, down from 225 at the same point last year. Average selling prices dropped to 171,000 pounds for 2008, compared to 188,000 pounds in 2007, reflecting ongoing pricing pressure and a higher proportion of affordable completions.
Discussions with debt providers relating to the refinancing of existing debt facilities continue on a constructive basis, the firm added.
Shares of Arriva (UK:ARI: news , chart , profile ) fell 3% after it was cut to conviction sell from buy at Goldman Sachs, with the broker saying the U.K. bus and rail operator is expensive vs. peers, its balance sheet no longer looks strong, a likely rise in pension deficit will also hurt its balance sheet and higher unemployment across Europe will affect its three divisions.
Pub chain J.D. Wetherspoon (UK:JDW: news , chart , profile ) fell 6.3%. It was downgraded to sell from hold by Deutsche Bank, with the broker saying it has the biggest refinancing hurdles to overcome in the pubs sector.
"If it has to hack into the group cost base to help with the refinancing, it may delay any recovery coming out of the recession," the broker said.By Sarah Turner, MarketWatch
