Europe close: Markets fall ahead of US data, but mining stocks jump

European stocks were a sea of red on Tuesday as investors showed their nerves ahead of a key inflation report and details of the latest central bank meeting in the US the following day.

The Stoxx 600 finished 0.6% lower at 505.82, with losses of more than 1% in Frankfurt and Milan partly offset by just a 0.1% decline in London on the back of strong gains in the mining sector.

"In an otherwise quiet trading session without major economic data releases investors sold stock indices as risk off sentiment dominated the agenda ahead of Wednesday's FOMC minutes and CPI print," said Axel Rudolph, senior market analyst at IG.

The annual growth in the US consumer price index is expected to have risen to 3.4% in March, from 3.2% the month before, though core inflation should have dipped to 3.7% from 3.8%.

Dan Coatsworth, investment analyst at AJ Bell, said a rise in headline inflation "will certainly give the Fed food for thought".

He said: “The central bank wants to see sustained evidence of inflation coming down and that doesn’t appear to be on the menu [...] The Fed putting it into black and white could be a difficult pill for investors to swallow, so brace yourself for turbulence on the market this week.”

Market movers

London's mining sector was outperforming the wider markets as commodity prices gained. Precious metals miner Fresnillo rose as gold prices hit a fresh record high of $2,384.50 an ounce.

Miners Rio Tinto and Anglo American also advanced as iron ore prices rose. Russ Mould, investment director at AJ Bell, said iron ore was rising amid speculation that demand will improve from Chinese steelmakers. "The Chinese government is eager to stimulate the economy and there is a hope that its initiatives will feed through into greater steel activity, with iron ore a key raw material."

European defence shares were under the cosh after Goldman Sachs said in a research note that it sees more downside than upside risk for the sector’s valuations approaching 2025. Defence peers BAE Systems, Rheinmetall, Saab, Thales Leonardo and Hensoldt all fell sharply.

BP shares were up after the oil giant said it expected higher upstream production in oil and gas in the first quarter.

Struggling French IT and consulting business Atos dived 14% after the company announced it as raising €1.2bn in new debt and equity as it attempts to slash its leverage position and lower debt.