By Carla Mozee, MarketWatch

LONDON (MarketWatch) -- U.K. equities fell Tuesday, swept lower with other European markets as the conflict in Ukraine escalated. Also putting some pressure on the benchmark index was Diageo PLC as the drinks maker sought control of an Indian liquor company.

The FTSE 100 fell 0.6% to 6,541.61, wiping out Monday's rise of 0.3%.

The decline picked up pace late in afternoon trade following reports about military activity in the Ukraine, stoking fears that the country is on the brink of a civil war. The Stoxx Europe 600 index fell by 1% to 326.58, and Russia's benchmarks each lost at least 2.5%.

Contributing to the FTSE's pullback throughout the session were shares of Diageo . They ended down 0.4% as the British company and a Dutch unit offered $1.9 billion to buy another 26% stake in United Spirits Ltd. The Indian company's brands include McDowell's No. 1, Black Dog Scotch whisky and Pinky vodka. A successful bid would push Diageo's stake in United Spirits to nearly 55%.

At the same time, shares of G4S dropped 3% after Deutsche Bank said it doesn't see significant "hidden value" in G4S to warrant the security company's current valuation, and downgraded its rating on G4S to sell from hold. "We expect a lower Group growth profile in this cycle despite benefits from [emerging markets] exposure. We see limited scope for large cost saving surprises," wrote Deutsche Bank analysts. "We trust the new management's plans for the business can improve operating results however in our view the benefits are more than priced in."

But Imperial Tobacco Group picked up 0.3% after the said 900 jobs will be lost as part of its restructuring effort.

On the economic front, U.K. inflation slowed in March to its lowest annual rate since October 2009. Annual inflation was 1.6% in March, down from 1.7% in February, said the Office for National Statistics. The Bank of England's inflation target is 2%.

"Considering the movements in producer prices, we believe that inflation is unlikely to move up in the coming months," said ICICI Bank in a note Tuesday, adding that it expects the Bank of England to hold monetary policy unchanged this year.

The ONS separately said U.K. housing prices climbed 9.1% in February from the year-ago period, higher than the 6.8% annual rate in January.

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