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Mar 27, 2017

European Markets at Close Report: European Stocks Finish Lower as Trump Rally Falters

Sara Sjolin, Victor Reklaitis
European stocks finished in the red Monday, alongside a slide for global equities, as investors continued to worry the Trump administration will not be able to push through its reforms.
The Stoxx Europe 600 index SXXP, -0.40%  lost 0.4% to end at 375.01, though it finished above its session lows.
On Friday, the pan-European benchmark dropped 0.2% to end 0.5% lower for the week, as it became clear U.S. President Donald Trump was running into difficulties getting approval for his repeal of Obamacare. That sparked concerns Trump will struggle to follow through on other election promises, such as corporate tax cuts, the prospect of which has helped drive a recent rally in stocks world-wide. Republican leaders ended up pulling their health-care bill from a House of Representatives vote late Friday, and analysts said that helped spark selling in global stocks on Monday.
Read: Debt limit looks like a real struggle after health bill debacle
And see: ‘Trump disappointment trade is now in full swing’ — analysts on global stock selloff
“Equity valuations have been underpinned by the Trump reflation trade since November, but the failure of the health-care bill raises major doubts about the strength of the administration and risks unwinding all the gains that the market has seen over the past five months,” said Rebecca O’Keeffe, head of investment at stockbroker Interactive Investor, in a note.
Read: These 5 charts show how Trump’s health-care flop is hitting markets
How the GOP health-care bill failed
In a blow to President Trump's young administration, House Republicans pulled their bill to replace Obamacare after failing to gain support within their own party.
Sectors bruised: Banks, which have particularly benefited from the reflation trade, were among the notable decliners in Europe on Monday.

Shares of Lloyds Banking Group PLC LLOY, -1.62% LYG, -0.87%  dropped 1.6%, UBS Group AG UBSG, -0.64% UBS, +0.64% fell 0.6%, Deutsche Bank AG DBK, +0.98% DB, +0.48%  lost 0.2%, and Société Générale GLE, -0.39%  gave up 0.4%.

The risk-off trade also hit miners and oil companies, with shares of metals giant Glencore PLC GLEN, -4.38% GLCNF, -2.98%  down 4.4% and energy heavyweight Royal Dutch Shell PLC RDSB, -0.32% RDS.B, +0.33%  off 0.3%.

Oil prices CLK7, -0.65%  recently traded down by about 0.6%, as concerns over rising U.S. rig counts outweighed chatter that the Organization of the Petroleum Exporting Countries may extend its production cuts.

Read: OPEC urges members to uphold oil production cuts
Individual indexes: The commodity- and bank-heavy FTSE 100 UKX, -0.59%  fell 0.6% to end at 7,293.50 in London, suffering its lowest close in almost a month.

Germany’s DAX 30 index DAX, -0.57%  gave up 0.6% to finish at 11,996.07, while France’s CAC 40 index PX1, -0.07%  lost 0.1% to 5,017.43.

Economic news: Business sentiment in Germany has improved in March, as the Ifo business climate index rose to 112.3 points, up from 111.1 in February. Economists had expected a reading of 111.1 for March.

Separately, European Central Bank board member Sabine Lautenschläger said the bank should prepare to tighten policy as soon as economic data are stable.
The euro EURUSD, +0.6574%  traded at $1.0883, compared with $1.0800 late Friday in New York, as the dollar lost ground against major currencies.