London stocks plunge as May calls snap election

Indices were hit also by falling metals prices, traders said, as investors returned to their desks after a four-day Easter break.

London stocks plunged and sterling rose after Prime Minister Theresa May called for an early election

Around 1330 GMT, the London FTSE 100 index of leading shares was off 2.0 percent as miners and banks suffered while the Paris CAC 40 shed 1.5 percent and Germany's DAX lost 0.9 percent.

The pound, meanwhile, rose.

In New York, the Dow Jones index slipped 0.3 percent just after the opening bell.

British Prime Minister Theresa May earlier had called for an early general election on June 8 in a surprise announcement as Britain prepares for delicate negotiations on leaving the European Union by 2019.

"May has surprised markets," said David Cheetham, chief market analyst at XTB trading group.

"The pound has recovered from some earlier jitters when news of a statement from the PM sent sterling falling."

Sterling, which has lost some ten percent of its value since last year's surprise referendum vote to leave the European Union, added 1.25 percent to hit a ten-week high to the dollar of 1.2741 by mid-afternoon.

"This bombshell development has offered Sterling a solid boost, with markets now evaluating what impact this may have on the Brexit negotiations," said FXTM research analyst Lukman Otunuga.

"The fact that May stated that she wants an election to ensure strong leadership that will deliver on Brexit may quell some related jitters in the short term," Otunuga added, while cautioning that "longer-term bears could exploit the potential political uncertainty to drag sterling lower".

And then there's France

Beyond Britain, traders were also focused on France less than a week before Sunday's presidential election.

"The French Presidential elections will dominate a week that also includes the first busy week of US earnings season," said a note from Deutsche Bank.

"Market-friendly candidate (Emmanuel) Macron remains well ahead... but obviously there'll be some concern with the first round getting tighter that he'll fail to be in that run-off."

An unpredictable race has narrowed dramatically in recent days, with polls suggesting four candidates are vying for a May 7 run-off.

Scandal-hit conservative Francois Fillon and radical leftist Jean-Luc Melenchon are steaming up behind the two frontrunners -- Macron and French far-right leader Marine Le Pen.

Geopolitics dog Asia

In Asia, Japanese shares won a boost from a weaker yen but some other key Asian markets drifted lower on geopolitical concerns, with lower iron ore prices dragging on mining stocks in Sydney.

US Vice President Mike Pence reiterated his country's commitment to the security of Japan on a visit to Tokyo on Tuesday, as North Korea vowed to launch missile tests "every week" -- ramping up fears over its weapons programme.

In an interview with the BBC, the nuclear-armed North also threatened "all-out war" if the US took any action against it.

"One suspects the concerns in North Korea have further to play out," said IG market strategist Chris Weston, citing worries of further missile testing in the near term.

Hong Kong was down more than one percent after a two-day holiday, while Shanghai closed down 0.8 percent despite positive Chinese GDP growth data released Monday.

Key figures around 1330 GMT

London - FTSE 100: DOWN 2.1 percent at 7,174.81 points

Frankfurt - DAX 30: DOWN 0.9 percent at 12,005.77

Paris - CAC 40: DOWN 1.4 percent at 4,999.18

EURO STOXX 50: DOWN 1.0 percent at 3,414.53

New York - Dow: DOWN 0.3 percent at 20,575.29

Tokyo - Nikkei 225: UP 0.4 percent at 18,418.59 (close)

Hong Kong - Hang Seng: DOWN 1.4 percent at 23,924.54 (close)

Shanghai - Composite: DOWN 0.8 percent at 3,196.71 (close)

Euro/dollar: UP at $1.0701 from $1.0643

Pound/dollar: UP at $1.2741 from $1.2565

Dollar/yen: DOWN at $108.69 from 108.97 yen

Oil - Brent North Sea: DOWN 31 cents at $55.07 per barrel

Oil - West Texas Intermediate: DOWN 26 cents at $52.39

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