LONDON MARKETS: FTSE 100 Drops After IMF Cuts U.K. Growth Forecast On Brexit Impact

By FeaturesDow Jones Newswires

U.K. stocks ended lower on Wednesday after the International Monetary Fund downgraded its forecast for Britain's growth, saying last year's decision to leave the European Union is slowing the economy.

London-listed shares were also lower alongside other global markets, which were unable to gain much traction after U.S. lawmakers neared completion of an overhaul of the country's tax code.

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What did the market do?: The FTSE 100 index fell 0.3% to close at 7,525.22, its lowest close since Friday.

The British pound bought $1.3408, up from $1.3385 late Tuesday in New York.

What's moving markets: The International Monetary Fund downgraded its forecast for 2017 U.K. growth (http://www.marketwatch.com/story/imf-downgrades-uk-growth-forecast-2017-12-20) to 1.6% from 1.7% and said it expects growth to slow to 1.5% in 2018. The fund said last year's decision to leave the European Union was slowing down growth, warning that a "breakdown in discussions could lead to a disorderly exit from the EU and sharp falls in asset prices."

"The U.K. economy is already losing out as a result of this decision," said IMF Managing Director Christine Lagarde at a press conference, according to media reports.

"That narrative we identified as a potential risk in May 2016 is actually being rolled out as we speak. It's not experts talking--it is the economy demonstrating that," Lagarde said.

Before the June 2016 Brexit referendum, the IMF had warned that a "leave" vote would have serious consequences for the U.K. economy.

Meanwhile, Bank of England Gov. Mark Carney told the Treasury Select Committee that EU banks may have to set up costly subsidiaries in the U.K. if Brexit talks turn sour. EU banks can currently sell their products and services in the U.K. through the so-called passporting mechanism, but that system could disappear after the U.K. exits the union.

Traders globally also watched developments in the U.S., where the Republicans were getting closer to sending a bill on tax cuts and other changes to President Donald Trump to sign into law. The Senate passed a massive overhaul of the tax code (http://www.marketwatch.com/story/republican-tax-bill-clears-house-and-heads-to-senate-for-vote-2017-12-19)early Wednesday and the House is expected to follow suit later in the day.

What strategists are saying: "Global equity markets are struggling to find any significant direction or momentum as we approach Christmas, with low volumes and little news to move markets," said Rebecca O'Keeffe, head of investment at Interactive Investor, in a note.

"Even the U.S. tax reform bill passing its last major hurdle in the U.S. Senate, and a foregone conclusion to be passed in the House later today, had been so priced in that the muted reaction was not a surprise," she said.

Stock movers: Shares of Royal Dutch Shell PLC (RDSB.LN) (RDSB.LN) lost 0.5% after an Italian judged ruled that the Anglo-Dutch oil company and Italy's ENI SpA (ENI.MI) will face trial over an alleged $1.1 billion bribery scandal in Nigeria.

NMC Health PLC (NMC.LN) fell 4% after a trading update.

(END) Dow Jones Newswires

December 20, 2017 12:20 ET (17:20 GMT)