By Tricia Wright
LONDON (Reuters) - Britain's top shares sank to their lowest close in three weeks on Tuesday, hit by mining companies on concern about demand, while the deteriorating situation in Ukraine and doubts about corporate earnings hurt broader sentiment.
Miners came under pressure alongside base metals after data showed Chinese money supply grew at the weakest pace in more than a decade in March, another sign of softening economic momentum in the world's top metals consumer.
Global miner Rio Tinto was among the stocks declining the most, 3.1 percent, after it said weather-related disruptions in Australia and Canada cut its iron ore shipments.
The sector's decline accounted for around a quarter of the FTSE 100's drop of 42.15 points, or 0.6 percent, to 6,541.61 points, its lowest close since March 24. The decline put it back in the red after Monday's 0.3 percent rise.
The index last week suffered its biggest weekly loss in a month, dropping 2 percent as Wall Street's fears about over-stretched stock valuations, particularly in the technology sector, spread to Europe. With Intel and Yahoo set to report earnings on Tuesday, those concerns may resurface.
"(They) will feed into the fears about the tech sector, particularly if they miss expectations," CMC Markets senior market analyst Michael Hewson said.
"I think markets going into the Easter break will be a little bit reluctant to get aggressively long stocks ... We need (a significant beat on the earnings for this week) and a significant ratcheting down in tensions in the Ukraine, neither of which I expect."
Ukrainian armed forces on Tuesday launched a "special operation" against separatists in the town of Kramatorsk in the east of the country, Interfax news agency quoted the Defence Ministry as saying.
Underscoring the worries about earnings, brewer SABMiller fell 2.3 percent, one of the biggest declines in the FTSE 100. Disappointing full-year sales triggered profit-taking on a stock that trades at a premium to all its peers.
Charts signalled more falls, with analysts saying the FTSE 100 could move to around the bottom end of a range, between 6,400 to 6,800 points, it has been trapped in since October.
"It does feel a bit heavy with recent sell-offs being more intense than rallying periods. The key level is 6,500, and if this gives way then I would expect to see some more downside action towards 2014 lows (of 6,416)," FOREX.com technical analyst Fawad Razaqzada said.
Security group G4S fell 3 percent, with traders blaming a Deutsche Bank rating downgrade to "sell" from "hold" and target price cut to 210 pence from 221 pence. The shares are currently trading at 240.6 pence.
The investment bank acknowledged G4S's efforts to overhaul itself following a series of damaging failures and cited its exposure to emerging markets as a strength. But it reckoned its valuation is looking full.
G4S trades at a premium to its peers. It is on a 12-month forward price/earnings ratio of 16.9 times, according to Thomson Reuters StarMine SmartEstimates, which focus on the up-to-date predictions of the historically most accurate analysts.
Smaller security firm Securitas, meanwhile, trades on 12.8 times. Outsourcing peers Serco and Capita are on 14.2 times and 16.2 times respectively.
(Additional reporting by Atul Prakash; Editing by Larry King)