Britain's FTSE 100 index ended down 0.8 percent on Tuesday, as commodities dragged and inflationary data left many investors uncertain over the interest rate picture. As gold prices fell, BHP Billiton dipped 1.4 percent, Rio Tinto lost 1.8 percent, Antofagasta was down 3.7 percent and Xstrata by 2.7 percent.
Shares in Lonmin, the world's third-biggest platinum producer, lost 3.1 percent after it said it will spend around $6.5 million to rebuild a furnace in an operation that will slash first-half metal sales by around 40 percent.
US crude oil prices dipped below $52 a barrel after Saudi Arabia's oil minister said Opec production cuts were working well, and heavyweight oil stocks weighed. BP dipped 1.5 percent and rival Royal Dutch Shell fell 0.8 percent.
BP had earlier said it would implement recommendations made by an independent panel that identified material deficiencies in safety at its US refineries. The FTSE 100 index closed down 47.8 points or 0.8 percent at 6215.7.
"We've been pretty weak this afternoon and I think it's a resources story yet again - they have been a big drag on the market," said Robert Parkes, a strategist at HSBC.
Earlier in the session, official UK data showed Britain's inflation rate accelerated faster than expected to 3.0 percent in December, the highest since comparable records began a decade ago. The FTSE sank back into negative territory midway through the day after US data showed New York manufacturing activity fell more than expected in January.
Worries on inflation dragged the banking sector. Barclays dipped 1.7 percent, HBOS was down 1.6 percent and Lloyds TSB fell 1.3 percent. "The market is very sensitive at the moment to both growth and inflation data," said HSBC's Parkes. "It's most important that the growth indicators aren't too hot or too cold, and the inflationary data stays well behaved."
"We have been concerned about the possibility of rising interest rates and that's one big risk out there for equity markets." Utility Scottish & Southern topped the FTSE 100 leaderboard, gaining 2.2 percent after traders said the company had rejected a 1,750 pence per share bid. The company declined to comment.
Further on the upside, aerospace company Smiths Group added to a gain of nearly 12 percent in the previous session on the sale of its aerospace unit to General Electric for $4.8 billion. The stock climbed 1.6 percent after positive broker notes from Lehman Brothers, Goldman Sachs and UBS.
Positive sentiment within the defence sector helped push BAE Systems and Rolls-Royce both up about 1 percent, traders said. "It's going to be on the back of positive sentiment on the Smiths deal ... people are now going to start looking at consolidation in the industry (and) who could buy who," one trader said.
Among FTSE 100 losers, home-improvement retailer Kingfisher fell 2.1 percent after Lehman Brothers cut its price target citing a weak market and pressure "until the outcome of the crucial Easter trading is known". Standard & Poor's also downgraded the company's credit rating on Monday.
Home Retail Group dipped 2.8 percent after Fitch Ratings said in a report that the European retail sector will "face diverse credit conditions and challenges".
In other retailing stocks, Tesco, Britain's biggest retailer, dipped 1 percent after only just beating analysts' forecasts with a 5.9 percent rise in underlying UK sales over Christmas.
"You're seeing a bit of sector rotation too in the retailers," a trader said. "There has been a few Christmas updates over the last few days and you're now seeing a bit of selling out of the retail sector."
Sugar and sweetener company Tate & Lyle lost 3.6 percent after a Credit Suisse price target downgrade which said evidence that artificial sweetener Splenda's growth in the US was slowing.
Among midcaps, Debenhams lost 6.9 percent after the department store retailer said it remained cautious for the remainder of its financial year as like-for-like UK retail sales fell 4 percent in the 19 weeks to January 13. The stock was also hurt by a downgrade from Bridgewell Securities.
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