By Carla Mozee, MarketWatch

Banks take a hit; Scottish lawmakers to vote on plan for 2nd independence referendum

U.K. stocks sold off Wednesday, with the "Trump trade" that has driving a global stock rally seeming to fade as investors turned more pessimistic about the chances of the new U.S. president driving through planned reforms.

Investors were also continuing to reassess the outlook for U.K. monetary policy, especially the path of interest rates, after a faster-than-expected increase in British inflation.

The FTSE 100 slumped 0.9% to 7,314.89, trading around its lowest since March 9. No sector was higher, and the basic materials, financial and industrial groups led losses.

The London index on Tuesday dropped 0.7% (http://www.marketwatch.com/story/ftse-100-edges-up-with-banks-higher-ahead-of-inflation-data-2017-03-21), retreating from a record closing high achieved Monday. In Tuesday's session, British blue-chips declined as the pound pushed higher, then the selloff picked up pace alongside a slide in U.S. equity benchmarks (http://www.marketwatch.com/story/sp-500-dow-on-verge-of-snapping-109-day-streak-without-1-tumble-2017-03-21) .

Some analysts said the downbeat mood in markets has been triggered by doubts about the implementation of the Trump administration's tax and reform policies in the U.S. Hopes for an economic boost from the plans have been driving a rally in stocks globally, known as the "Trump trade."

"Even the mistiest eyed optimist appears to be coming to the realization that even on health care where there is some form of consensus, that reforms are likely to take a lot longer than realized and as such any other programs like tax and banking reform and infrastructure spending are likely to get pushed further out into the future," said Michael Hewson, chief market analyst at CMC Markets UK, in a note.

Read:Here's the latest sign that the 'Trump trade' is losing traction (http://www.marketwatch.com/story/heres-the-latest-sign-that-the-trump-trade-is-losing-traction-2017-03-21)

And:Trump goes to bat for 'Trumpcare' ahead of vote (http://www.marketwatch.com/story/trump-today-president-goes-to-bat-for-trumpcare-ahead-of-vote-2017-03-21)

Investors will be looking for more signs of whether the push for reforms in the U.S. will be successful in Thursday's vote in the U.S. House of Representatives on the Republican Party's health care plan.

Banks hit: Expectations that the Trump administration will loosen U.S. regulations on banks and that the Fed will continue to raise interest rates have helped drive gains for the bank sector globally. On Wednesday in London, bank stocks lost ground.

Barclays PLC (BCS) (BCS) gave up 2.6%, HSBC Holdings PLC (HSBA.LN) (HSBA.LN) (HSBA.LN) dropped 1.1%, and Lloyds Banking Group PLC (LLOY.LN) (LLOY.LN) lost 1.9%.

Meanwhile, Royal Bank of Scotland PLC shares (RBS.LN) (RBS.LN) fell 2%, and Standard Chartered PLC shares (STAN.LN) declined 2.9%.

Stock movers: Among individual names, Kingfisher PLC (KGF.LN) sank 5.6% after the home-improvement retailer flagged concerns about the uncertainty for the U.K. economy (http://www.marketwatch.com/story/kingfisher-profit-rises-chairman-to-retire-2017-03-22) in the wake of the Brexit vote. The company said it remains cautious on its outlook for France ahead of the upcoming presidential election.

See:How Brexit is hurting U.K.-focused stocks -- in one chart (http://www.marketwatch.com/story/how-brexit-is-hurting-uk-focused-stocks-in-one-chart-2017-03-22)

Scotland and sterling: The pound fell to $1.2455 ahead of a vote in the Scottish Parliament on whether a second independence referendum should be held. The vote is slated to take place at 5:30 p.m. London time, or 1:30 p.m. Eastern Time.

Most Holyrood lawmakers were expected to support First Minister Nicola Sturgeon's push for a second referendum on whether Scotland should leave the U.K., saying she's concerned about Scotland's economic future when it eventually leaves the European Union. U.K. Prime Minister Theresa May doesn't support Sturgeon's stance.

In 2014, Scots by 55% to 45% voted to remain part of the U.K. alongside England, Wales and Northern Ireland.

(http://www.marketwatch.com/story/is-the-uk-headed-for-a-snap-election-this-year-bookies-are-more-certain-than-ever-2017-03-20)Sterling early Wednesday hit an intraday high of $1.2507, the first time since Feb. 24 it traded above $1.25, according to FactSet data. It jumped Tuesday after data showed British inflation rose to 2.3%, overshooting the Bank of England's 2% target for the first time since September 2013. That stoked speculation the central bank may be compelled to raise interest rates sooner than later.

See: U.K. rate hike in May? (http://www.marketwatch.com/story/boe-rate-hike-in-may-pressure-mounts-after-uk-inflation-jumps-to-3-year-high-2017-03-21)

The pricier pound weighed on blue-chip stocks, as a weaker sterling could help increase earnings and sales for multinational companies listed in London.

The pound late Tuesday traded at $1.2479.

Read:Opinion: Distracted by the Continent, May ignores trouble brewing in Scotland (http://www.marketwatch.com/story/distracted-by-the-continent-may-ignores-trouble-brewing-in-scotland-2017-03-21)

And:Bookies are more certain than ever that the U.K. headed for a 'snap' election (http://www.marketwatch.com/story/is-the-uk-headed-for-a-snap-election-this-year-bookies-are-more-certain-than-ever-2017-03-20)

 

(END) Dow Jones Newswires

March 22, 2017 08:02 ET (12:02 GMT)

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