EUROPE MARKETS: European Stocks Drop As U.S. Tax Optimism Fades

By Sara Sjolin, MarketWatchFeaturesDow Jones Newswires

Spanish stocks drop as Catalans vote in regional election

European stocks dropped again on Thursday, with the passage of a historic tax reform in the U.S. failing to keep the December rally alive.

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Traders in Europe were also watching the regional election in Catalonia, Spain, where the polls point to a dead race between the pro- and anti-independence parties.

What are markets doing: The Stoxx Europe 600 index lost 0.3% to 387.24, on track for a third straight day of losses.

Germany's DAX 30 index fell 0.3% to 13,034.19, while France's CAC 40 dropped 0.4% to 5,328.56.

The U.K.'s FTSE 100 index was marginally lower at 7,522.38. Spain's IBEX 35 index was down 0.3% at 10,176.50.

The euro was flat around $1.1869 compared with $1.1873 late Wednesday in New York.

What's driving the market: Hopes for tax reforms in the U.S. have sparked a rally in recent weeks, but the optimism has waned in recent days as the Republicans got closer to the final approval. The House of Representatives on Wednesday passed the tax bill, a day after the Senate gave the package the green light. All there's left now is for President Donald Trump to sign the bill into law.

Analysts said the weakness in stock markets was a classic example of "buy the rumor, sell the fact," where equities rally in the run-up to an anticipated event, but then sell off once it actually happens. U.S. stocks closed marginally lower on Wednesday (, still trading close to all-time highs.

Read:4 reasons Wall Street banks have the hots for Europe in 2018 (

Also read:European stocks set for a winning 2017, but euro's rise was a challenge (

Meanwhile in Spain, Catalans take to the polls to vote for a new regional assembly. The ballot could produce a win for pro-independence parties, though most polls indicate fewer seats will be won by that group than the last election in 2015.

In October, the region voted for independence in a referendum declared illegal by Madrid, plunging the country into a constitutional crisis. The central government eventual stepped in and imposed direct rule, ousting its leaders and calling for new elections.

Read:Spain's Catalan voters head to the polls in a too-close-to-call race (

What are strategists saying: "Today's vote [in Catalonia] may put the struggle to bed should a clear majority arise for either camp, however no clear result will likely see protracted regional uncertainty," said Henry Croft, research analyst at Accendo Markets, in a note.

Croft also commented on the market after the House passed the U.S. tax reform:

The market indifference confirmed "a widely touted 'buy the rumor, sell the fact' event that, despite widespread optimism resulting in an equity market rally across the globe in 2017, now leaves investors mulling its long-term effect on equities," he said.

Stock movers: Shares of Steinhoff International Holdings NV plunged 14%, extending its weekly drop to 52% after the retailer on Tuesday said lenders were increasingly pulling their credit lines. Steinhoff shares are now down 95% this year after an accounting scandal was disclosed earlier this month.

Nokia Corp. (NOK) (NOK) climbed 2.7% after signing a multi-year patent license agreement with China's Huawei ( Technologies Co.

Shares of Volkswagen AG (VOW.XE) (VOW.XE) rose 0.2%, even after its luxury car brand Audi said it's recalling 875,000 vehicles in Europe ( due to a potential heater problem that could result in fires.

Economic news: Business confidence in France's manufacturing sector dropped to 112 points (https://ww) in December from 113 points in November, coming in in line with estimates. Despite the small decline, business confidence remains well above the long-term average of 100 for the indicator.

(END) Dow Jones Newswires

December 21, 2017 04:49 ET (09:49 GMT)