UK stocks hit by global gloom, windfall tax threat for utilities

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The London Stock Exchange Group offices are seen in the City of London, Britain, December 29, 2017. REUTERS/Toby Melville

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  • Power generators hit by report of windfall tax
  • Royal Mail slides as Peel Hunt downgrades to sell
  • FTSE 100 down 0.4%, FTSE 250 off 1.5%

May 24 (Reuters) - UK's FTSE 100 fell on Tuesday, tracking a sour global mood with energy stocks leading declines and shares of British utilities slumped after a media report fuelled speculation of a windfall tax.

The benchmark FTSE 100 (.FTSE) fell 0.4% with oil majors Shell (SHEL.L) and BP (BP.L)among top drags,while the midcap FTSE 250 (.FTMC) dipped 1.5%.

UK power generating companies Drax (DRX.L), Centrica (CNA.L) and SSE (SSE.L) plunged between 13.8% and 7.9% after the Financial Times reported that the British government planning a possible windfall tax on more than 10 billion pounds ($12.48 billion) of excess profits by electricity generators. read more

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The wider utilities index (.FTNMX651020) dropped 0.6%.

"The expectation is that this would be linked to the amount of cash poured into ESG initiatives to power the energy transition but also potentially in terms of measures taken by companies to ease the burden of high bills for cash strapped customers," said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.

"However, we will have to wait for any detail of any plan to establish how much of a hit such a levy, if it is introduced, could have to the bottom line."

Wall Street's main indexes fell on Tuesday, with the tech-heavy Nasdaq leading the slump, as a weak earnings forecast from Snapchat-owner Snap Inc (SNAP.N) added to nerves about an inflation-struck economy.

Advertising group WPP (WPP.L) tumbled 9.3% and broadcaster ITV (ITV.L) dropped 4.9%.

A business survey showed Britain's economic momentum slowed much more than expected this month, adding to recession worries as inflation pressures mount. read more

Royal Mail (RMG.L) slid 5.5% after Peel Hunt downgraded the stock to "sell" from "buy", saying it now assumes no dividends or buybacks.

Restaurant Group Plc (RTN.L) slipped 2.3% despite saying strong sales at Wagamama and its Frankie & Benny's chain of restaurants were helping offset the impact of inflation on expenses. read more

($1 = 0.8012 pounds)

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Reporting by Sruthi Shankar and Amal S in Bengaluru; editing by Uttaresh.V and Rashmi Aich

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