British shares dipped on Wednesday along with other European bourses before a final vote in the US House of Representatives that would allow Donald Trump to sign massive tax cuts into law. The FTSE 100 shed 0.3 percent, outperforming the bigger losses suffered by euro zone benchmarks due to a strengthening euro.
"How much higher can we go given that most of the gains seen this year have been predicated on there being some sort of fiscal stimulus or tax reform, which now looks like being delivered," said CMC Markets chief analyst Michael Hewson. "From an investment point of view that means that investors have a decision to make as we head into 2018. How much more gas is in the tank for this rally given the gains seen already?"
NMC Health was the biggest faller, losing 4 percent after it reiterated its guidance for 2018 and gave an update on its strategy. "This in our view could signal potential M&A which may be in newer geographies or capabilities," Jefferies said in a note, adding it would wait for a conference call with investors "for further clarity".
British American Tobacco was the biggest weight, down 1.5 percent following gains in the previous session. Some analysts have said BAT should benefit from the US tax reform as the UK-listed tobacco company makes more than 40 percent of its profits in the United States.
Drugmaker Shire fell back 1.4 percent following a 3.8 percent surge in the previous session that traders attributed to vague takeover rumours. "Shire is arguably an attractive target for 'Big Pharma' given the company's dominant franchises and strong cash flow generation," Jefferies analysts said in a note.
"US tax reform legislation could drive an M&A reacceleration in the broader healthcare arena. And this dynamic could potentially result in another bid for Shire." Paper and packaging firm Mondi gained 2.6 percent, boosted to the top of the FTSE by an upgrade to "buy" from Goldman Sachs.
Among mid-caps, Drax Group fell 2.5 percent after it cut its full-year core earnings forecast by 10 million pounds. Firming crude prices helped Tullow Oil shares jump 5.2 percent.
In the small-cap universe, shares in construction materials firm Low & Bonar ? plunged 20 percent after its CEO resigned. Carillion on the other hand gained 4.6 percent after it moved the start date for new chief executive Andrew Davies forward to January 22 from April 2.
Still in the matter of corporate governance, LSE added 0.1 percent after a push by activist hedge fund TCI to oust its chairman was heavily defeated on Tuesday, and bookmaker William Hill was up 0.4 percent after it named Roger Devlin its chairman-designate. Tesco edged up just 0.1 percent after its 3.7 billion pound takeover of wholesaler Booker was cleared by Britain's competition regulator, a widely expected approval.
The basic resources sector enjoyed the best performance, providing the biggest boost to the index with miners Rio Tinto, Anglo American, BHP Billiton and Antofagasta up 1.3 to 1.8 percent as metals prices rose.
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