FTSE 100 falls as dollar weakens versus pound on Trump policy woes

Stock markets are taking a hit and the dollar has weakened over fears President Trump's promised US tax cuts and infrastructure spending will fail to get off the ground.

The FTSE 100 was 1% down in early trading on Monday though it later pared some of the losses and closed 0.6%, or 43 points, lower at 7293.

Sterling was up more than a cent against the greenback, topping $1.26 for the first time since early February during the session before slipping just below that mark.

The stock market performance was mirrored in Germany and Italy though in France and Spain, leading share indices ended the day little changed.

One market analyst said it amounted to a "Trump tantrum" - a clear reaction to the collapse, on Friday, of the US President's bid to repeal "Obamacare" health reforms which failed to muster enough support in a Congress dominated by his own Republican party.

Traders said it cast doubts on his ability to trim tax bills and spend big on things such as the road and rail network - key pro-growth election promises.

Some of the biggest losers on the FTSE 100 on Monday were the companies that had seen their shares benefit the most since Trump's election win on the prospect of lucrative contracts.

They included support services firm Babcock, which closed 4% lower - also impacted by a Government announcement on nuclear decommissioning - and CRH - the Irish-based building materials group, which fell 2%.

Companies with dollar earnings have benefited too from sterling's weakness since the UK's vote to leave the EU as that income is worth more when it is converted to pounds.

While a weakening dollar threatens to curb that currency boost for UK-based companies, the pound has been up to 20% down versus the US currency since the Brexit referendum.

It remains 16% lower ahead of Wednesday when Theresa May is due to formally begin the process for leaving the EU.

Kathleen Brooks, research director at City Index, said: "The markets are having their own 'Trump Tantrum', as investors seriously doubt whether the President's abrasive style will work in Washington."

She (Munich: SOQ.MU - news) added: "Overall, we don't think that Article 50 itself will be a risk event for UK asset prices this week.

"The next big Brexit risk event will be the EU summit at the end of April, until then we expect the market to focus on Trump and the fallout of his healthcare bill."