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Europe: Shares led lower by weaker miners after Trump setback

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[MILAN] European shares fell on Monday, hit by losses among miners and banks after US President Donald Trump's failure to pass his healthcare bill raised worries over his ability to deliver on fiscal stimulus promises.

The Stoxx 600 index fell 0.5 per cent by 0953 GMT. The pan-European index has risen around 10 per cent since Mr Trump was elected president in early November, partly in anticipation of a big economic stimulus under his administration.

But Mr Trump suffered a large setback on Friday in a Congress controlled by his own party when Republican leaders withdrew legislation to overhaul the healthcare system.

"No doubt this is likely to put a lid on the recent rally," Markus Huber, trader at City of London Markets, said.

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But some analysts maintained that the failure on healthcare need not indicate the tax reform was jeopardised.

"Following their defeat on health care, Republicans will feel the pressure to enact some kind of tax reform, and may be more willing to negotiate," said Holger Schmieding, senior economist at Berenberg.

The Basic Resources index was the biggest sectoral loser, down 3.3 per cent to a two-week low, as copper prices slipped following Mr Trump's healthcare setback.

Steel miner ArcelorMittal was the top faller, down 5.2 per cent and set for its worst day in 3-1/2 months. Finnish peer Outokumpu was also down 3.6 per cent, and Voestalpine dipped 2.4 per cent. Steel makers have been rising since Mr Trump's election on hopes of greater infrastructure spending.

Bucking the weaker trend were precious metal miners such as Randgold and Fresnillo, both up more than one per cent and among the few gainers on the Stoxx, as risk appetite fell, boosting gold which is seen as a safe haven asset.

In spite of the pull-back, the Stoxx index remained just 1.2 per cent below its highest levels in 15 months and some investors believe that prospects for equities in the region remain good thanks to solid economic data and earnings.

A German survey showing that business morale in Europe's largest economy improved unexpectedly in March added to signs the economic backdrop was improving, but European indexes remained in the red, as risk-off sentiment prevailed.

Germany's blue chip DAX index fell 0.6 per cent, although it came a bit off lows following the survey's release.

Morgan Stanley on Monday lifted its earnings forecasts and targets for European benchmark indexes, citing a stronger-than-anticipated economic recovery and the return of inflation. It also reiterated its "overweight" recommendation on financials.

Zodiac Aerospace rose 2.9 per cent after an upgrade from Credit Suisse to "outperform" on bets Safran would revise its bid and reject calls to abandon takeover plans following another profit warning at the aircraft seats maker earlier this month.

Ferrari shares raced to an all-time high, up 2.7 per cent after victory in the Australian Formula One grand prix boosted the racing car maker.