London stocks fall as US fiscal worries, UK budget deficit hit sentiment

May 22 (Reuters) - London equities fell on Thursday in broad-based declines as concerns over a deteriorating fiscal outlook in the U.S. and higher-than-expected UK government budget deficit dampened investor sentiment.

The blue-chip index .FTSE was down 0.7% as of 1037 GMT, on track to break its five-session winning streak.

The domestically focused midcap index .FTMC also fell 0.7%.

The spotlight was on U.S. President Donald Trump's sweeping tax and spending bill , which passed the Republican-controlled House of Representatives on Thursday after months of infighting over spending cuts and tax policies.

Market participants are concerned that the government debt in the U.S. will swell by trillions of dollars if Congress passes the proposed bill.

Meanwhile, data on Thursday showed that Britain's government began the 2025/26 financial year in April with borrowing figures exceeding expectations once again, indicating continued pressure on public finances.

The UK government's bond market has become increasingly volatile in recent years, reflecting unease among investors over Britain's mix of slow economic growth, high debt interest costs and persistent inflation.

Budget airline easyJet EZJ.L, which slipped 3.6%, was among the top losers on FTSE 100 after reporting half-year results.

On the flip side, Johnson Matthey JMAT.L soared 30.2% after the chemicals firm agreed to sell its catalyst technologies business to Honeywell International HON.O.

QinetiQ QQ.L advanced 6% after the UK government signed a 1.5 billion pound ($2.01 billion) five-year contract extension with the defence company.

Separately, the S&P Global UK Composite Purchasing Managers' Index (PMI), a gauge of the private sector economy, rose to 49.4 from 48.5 in April.

The rise was roughly close to the estimates made by economists polled by Reuters, moving closer to the threshold of 50 for growth.

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