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European equities ended lower on Tuesday, with the mood soured by poor PMI data, while the pound and euro were afforded some respite as the dollar's momentum ebbed.
Nerves will linger ahead of the key Jackson Hole meeting of central bankers, as investors wait for US Federal Reserve Chair Jerome Powell to offer some insight on future US monetary policy.
The meeting kicks off on Thursday, with Powell's speech due on Friday.
The FTSE 100 index closed down 45.68 points, or 0.6%, at 7,488.11 on Tuesday. The FTSE 250 ended down 192.45 points, or 1.0%, at 19,306.89. The AIM All-Share closed down 7.46 points, or 0.8%, at 899.82.
The Cboe UK 100 ended down 0.7% at 747.22, the Cboe UK 250 closed down 1.1% at 16,629.75, and the Cboe Small Companies ended down 0.7% at 13,220.56.
In European equities on Tuesday, the CAC 40 in Paris and the DAX 40 in Frankfurt both ended down 0.3%.
Economic activity in the UK slowed slightly in August as manufacturers were pummelled by weaker demand, but the services sector held up better than expected, according to survey data.
The S&P Global-Chartered Institute of Procurement & Supply flash UK composite purchasing managers' index slipped to an 18-month low of 50.9 points in August from 52.1 in July.
The reading remains above the no-change mark of 50.0, indicating the economy is still growing, but is edging closer to stagnation.
The eurozone economy also slowed again in August, preliminary figures from S&P Global showed on Tuesday, as cost-of-living pressures damped the service sector's Covid recovery and waning demand knocked manufacturers.
The flash eurozone purchasing managers' index composite output index fell to an 18-month low of 49.2 points in August, from 49.9 in July. Nonetheless, the reading did beat consensus, according to FXStreet, of 49.0.
The pound was quoted at $1.1864 at the London equities close Tuesday, up from $1.1787 at the close on Monday. Earlier in the session, sterling hit a low of $1.1717, a level not seen since March 2020 when global markets were hit by Covid-19 fears.
The euro dived to a new two-decade low against the dollar on Tuesday, hitting $0.9902 and remaining below parity for the second consecutive day.
The single currency recovered to $0.9987 at the European equities close, higher against $0.9964 at the same time on Monday. Against the yen, the dollar was trading at JP¥136.28 late Tuesday, lower compared to JP¥137.26 late Monday.
The dollar's momentum was hit by a weaker US PMI reading. The S&P Global US composite purchasing managers' index registered 45.0 index points in August, down from 47.7 in July.
In the FTSE 100, oil majors topped the blue-chip index as Brent prices soared. Brent oil was quoted at $99.90 a barrel at the London equities close Tuesday, jumping from $93.26 late Monday.
Shell closed 0.4% higher and BP ended up 0.2%. FTSE 250-listed oil firm Tullow also got a boost, rising 4.0%.
John Wood ended down 2.4% after the firm reported a widened interim loss as revenue stalled and costs rose.
In the half-year that ended June 30, its pretax loss widened to $31.5 million from $18.4 million a year ago. Finance expenses rose 19% to $64.1 million from $53.9 million.
‘Our first half of the year saw strong momentum in activity levels and order book growth but more to do on cash generation. It is encouraging to see the operational momentum in our business, especially the growth in our Projects and Consulting order book,’ John Wood said.
Elsewhere in London, cycling and motor parts retailer Halfords fell 16%. Panmure cut the stock to 'hold' from 'buy'.
Nanoco surged 6.7%. The nanomaterial developer and manufacturer said it filed another patent infringement lawsuit against Samsung Electronics, this time in Germany.
Nanoco said the litigation was based on a ‘sister patent’ to one of the patents disputed in its US lawsuit against Samsung.
The firm has accused Samsung of infringing its quantum dot patents, technology which is used on Samsung quantum dot LED televisions.
Stocks in New York were mixed at the London equities close, with the Dow Jones Industrial Average down 0.3%, the S&P 500 index was marginally higher, and the Nasdaq Composite was up 0.2%.
Gold was quoted at $1,751,38 an ounce at the London equities close Tuesday, up against $1,736.39 at the close on Monday.
In Wednesday's UK corporate calendar, there are half-year results from construction and engineering firm Costain and used car dealer Lookers.
In the economic calendar, there are US durable good orders at 1330 BST.
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