European markets slide into red after US senate backs plans to cut corporation tax
EUROPEAN markets slipped into red yesterday despite the American Senate backing plans for sweeping tax reforms that will slash US corporation tax.
The Republican-backed tax bill, designed to drive down the levy on businesses from 35 per cent to 21 per cent, was narrowly passed by the Senate – but must face a second vote to address procedural problems.
The FTSE 100 Index closed down 18.87 points to 7,525.22, with the Cac 40 in France and Germany's Dax also down 1.1 per cent and 0.6 per cent respectively.
David Madden, analyst at CMC Markets, said yesterday: "European stocks have slid into the red as the bullish momentum has evaporated.
"Last night the US House of Representatives voted in favour of introducing the new tax reforms but due to a procedural snag, they will have to vote on it again today.
"Investors have been looking forward to this day since Donald Trump won the presidential election, and now that it has arrived, traders are unwinding down their positions.
"Dealers are squaring up the books ahead of Christmas and some of the froth is being taken off of the top of the equity markets."
On the currency markets, the pound was up 0.2 per cent against the US dollar at 1.34 despite the International Monetary Fund cutting its outlook for UK economy in response to Brexit.
The IMF said UK gross domestic product (GDP) looked set to expand by 1.6 per cent this year, knocking back its prediction of 1.7 per cent growth from October.
However, it stood by previous forecasts for GDP to slow to 1.5 per cent in 2018, as Brexit uncertainty and the inflationary squeeze on household spending power puts the brakes on the UK economy.
The Washington DC-based organisation said firms are likely to continue deferring investment decisions until there is greater clarity on the UK's future trading relationship with the European Union.
The pound was down 0.2 per cent versus the euro at 1.128.
In oil, Brent crude was 0.6 per cent higher at US$64.28, as the Forties North Sea pipeline remained offline and US inventories fell by more than expected.
Focusing on UK stocks, telecoms giant BT took a downward turn after the government gave homes and businesses the legal right to demand high-speed broadband by 2020.
The government confirmed that everyone in the UK will have access to speeds of at least 10 Mbps under a regulatory Universal Service Obligation (USO), rejecting a voluntary proposal from BT to improve speeds.
Under the plan, broadband providers will face a legal requirement to provide high-speed broadband to anyone requesting it, subject to a cost threshold.
Shares in the company closed down 3.6p to 270.2p.
Away from the top tier, Carillion rose more than 4 per cent after the troubled infrastructure group brought in its new chief executive earlier than planned.
The firm was up 0.75p to 17p after revealing that Andrew Davies' start date will now be January 22, rather than April 2.
Interim boss Keith Cochrane will step down from his role in January, but will remain with Carillion in an advisory capacity to ensure an orderly transition, the firm added.
In November the HS2 contractor issued its latest profit warning and said it will breach its debt covenants, which resulted in another share price collapse.
The biggest risers on the FTSE 100 Index were Mondi up 47p to 1,874p, Rio Tinto up 65.5p to 3,710p, Anglo American up 25p to 1,490p, GKN up 4.9p to 304.4p.
The biggest fallers were NMC Health down 114p to 2,738p, British American Tobacco down 75p to 4,920p, Shire down 56.5p to 3,863.5p, Unilever down 57.5p to 4,125.5p.