London - Britain's main benchmark index fell for second day on Tuesday, led down by heavyweight materials stocks as metal prices weakened.
Miners Antofagasta, Randgold and Vedanta were among the top fallers after gold dropped to a five month low and copper plumbed its lowest in nearly two weeks.
Stronger-than-expected US economic data on Monday shortened the odds on the US Federal Reserve bringing forward a reduction to its asset-purchase programme, which is dependent on the state of the US economy and is currently expected to be cut early next year.
This has hit metals prices, which are seen to have been inflated by the flood of US money.
Global miner Rio Tinto announced on Tuesday it would halve its capital spending by 2015. Its shares fell 0.8 percent.
Stronger global economic growth is generally positive for stocks, the performance of which depends on corporate profits. Yet the FTSE's exposure to basic materials stocks, which account for nearly 10 percent of the index's weight, mean it could underperform if metal prices continue to fall.
Basic materials stocks knocked 5.3 points of the FTSE, which was down 15.28 points, or 0.2 percent, at 6,580.30 points at 10:53 SA time.
The British index has fallen roughly 2 percent over the past month, lagging a small rise for the STOXX Europe 600.
“I can see the FTSE declining slowly if commodity prices continue to fall,” Farhan Ahmad, a trader at Tradenext, said.
“It has not been a massive correction and I see it continuing in that vein unless we see something major to the contrary.”
Investors will be scrutinising US jobs data later in the week, especially the non-farm payrolls report on Friday, for a clearer picture of the US labour market.
Markus Huber, a senior trader at Peregrine & Black Capital, believes the better economic environment would help the FTSE rally to 6,900 points by mid 2014 and to 7,150 points by the end of next year.
“I think good economic data is overall positive for stocks, mainly because I think the Fed will only take drastic steps once a sustained improvement in the economy is visible,” Huber said. - Reuters