* European lenders follow U.S. banks lower, pull indices lower
* U.S. yield curve flattest in decades on clouded outlook
* Strong Chinese imports help Asian stocks buck the trend
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Abhinav Ramnarayan
LONDON, Nov 8 (Reuters) - Banking stocks dropped and the dollar slipped on Wednesday as doubts over tax cuts and bond market moves hurt profitability and raised questions over the longevity of the current expansion in the United States.
European banking stocks were the worst performing sector as share indexes across the continent opened lower, following a poor session for U.S. banks.
The dollar edged lower against a basket of currencies , hurt by a media report that suggested the implementation of a centrepiece corporate tax cut under discussion in U.S. tax reforms plans could be delayed.
Derek Halpenny, head of global markets research at Mitsubishi UFJ in London, said he was dubious over the progress of the tax cuts programme being urged by U.S. President Donald Trump’s campaign.
“The initial phases of discussions within the House (of Representatives) have brought up a lot of divisions and problems ... If the story is true that they’re considering a delay of one year to the corporate tax cut, those big differences will need to be sorted,” he said.
Francois Savary, chief investment officer at Prime Partners, said the doubts over the tax issue reinforce the case for some consolidation in the market, which has been fully priced for good news.
“It’s something that would impact the domestic stocks in the U.S. and would be a setback for the market in general (and) it’s more than stock specific as people would reassess earnings growth expectations to the downside,” he said.
Overnight, Goldman Sachs shares lost 1.51 percent and weighed the most on the main stock index.
This came after the U.S. 2-to-10-year Treasury yield curve hit its flattest in a decade, potentially cutting into the profits of banks, which borrow money at short-term interest rates in order to lend it out at longer terms.
Such a move can also imply that investors are expecting a slowdown.
European bonds were also snared by this yield curve flattening phenomenon, with yields on long-term German bonds falling to two-month lows on Wednesday.
This is a reversal of the trend when Trump was elected as U.S. president a year ago. Yields and stock prices jumped in late 2016 on what was dubbed the “Trumpflation” trade: a bet on rising rates, inflation and securities prices in the United States and beyond.
Analysts believe that a flattening yield curve at a time when the Federal Reserve is hiking rates is a sign that investors are concerned over the sustainability of economic growth and inflation in the world’s biggest economy.
In the European session, the two main banking indices suffered the most, falling 1.1 percent and 0.9 percent respectively, dragging an index of pan-European stocks lower 0.2 percent.
Earlier, Asian shares wrung out another decade peak as data showed China’s demand for imports remained buoyant, pushing the MSCI world equity index to a fresh high.
Beijing reported imports in October rose 17.2 percent from a year earlier, beating forecasts of 16 percent, but export growth was just under estimates at 6.9 percent.
Chinese crude imports slipped they lowest level in a year, pushing oil prices lower, although traders said the overall market remains well supported because of OPEC-led supply cuts.
U.S. crude oil was lower 0.2 percent at $57.06 while Brent crude futures were steady at $63.72 and off a over two-year peak of $64.65 hit earlier in the week.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Reporting by Abhinav Ramnarayan, Additional reporting by Jemima Kelly and Sujata Rao Editing by Jeremy Gaunt)