(Updates at market settle)
* FTSE 100 closes down 0.7 pct after setting 3-mth low
* Pharma hit as tax breaks for US suitors come under threat
* Disappointing economic data across Europe weaken demand
* Ukraine/Russia tensions hit global equity markets
By Francesco Canepa
LONDON, Aug 6 Britain's top equity index fell on
Wednesday, pummelled by disappointing economic data and mounting
concern over the crisis in Ukraine.
Pharma stocks were the biggest fallers on the FTSE 100
as investors worried that interest from U.S. suitors may
dry up if tax breaks for companies that shift their headquarters
overseas are reduced.
Broader market sentiment was also dented by data from
Britain and continental Europe, the two regions where British
blue chips derive about half their sales. Reports showed UK
industrial output and manufacturing grew less than forecast in
June, Italy unexpectedly slid into recession in the second
quarter and German industrial orders fell short of forecasts.
"The European equity indexes had been moving ahead of
events," Ecclesiastical fund manager Chris Hiorns said. "The
economic recovery that this bull run in equities was based upon
is not really that evident, and that has hurt sentiment."
The FTSE 100 fell 46.32 points, or 0.7 percent, to
6,636.16 points after hitting a three-month low of 6,588.43
points. The index cut losses in late trade, mirroring a bounce
on Wall Street.
Healthcare groups Shire, Smith & Nephew and
AstraZeneca, down between 3.6 percent and 4.1 percent,
led declines after three prominent U.S. senators urged President
Barack Obama to use his executive authority to reduce or
eliminate tax breaks for companies that move their headquarters
overseas to cut their U.S. tax bills.
Shire has agreed to a $55 billion takeover by U.S. rival
AbbVie, which plans to locate the combined company in
Britain, where taxes are lower. Smith & Nephew and AstraZeneca
had also attracted interest from U.S. companies this year.
"If this loophole does shut down, UK healthcare (companies)
will be less attractive to U.S. names, but the latter would
still have offshore cash balances with which to invest," Numis
analyst Sally Taylor said.
Investors were unnerved by news that Russia had massed about
20,000 combat-ready troops on Ukraine's eastern border and could
use the excuse of a humanitarian or peacekeeping mission to send
them across the border, according to NATO.
"As the tensions mount, we'll see more of a correction on
the equity markets. The mentality now is not to buy on dips but
to sell on rallies," Securequity sales trader Jawaid Afsar said.
Eight British blue chips went ex dividend on Wednesday,
shaving up to a further 14 points off the FTSE 100.
(Additional reporting by Sudip Kar-Gupta; Editing by Louise