The FTSE 100 has edged lower as Donald Trump issued an ultimatum to Republicans over healthcare reforms seen by investors as key test of the US president's ability to deliver on his agenda.
A vote on Trump's attempts to repeal Obamacare and replace it with the American Healthcare Act was due to take place in the House of Representatives yesterday, but has been delayed to today after last-minute negotiations between the president and his party.
White House budget director Mick Mulvaney has reportedly told Republicans to vote for the act, or Obamacare will be left in place.
US markets were muted in response to the delay, but the outcome of the vote is seen as crucial in sustaining, or undermining, the 'Trump trade' that has seen global stock markets rally on the prospects of higher growth from US tax cuts and infrastructure spending.
Should Trump fail to secure the reforms, investors may start questioning his ability to deliver on his pro-growth agenda that has animated stock markets.
'His ultimatum to House Republicans is a high-risk strategy,' said Kathleen Brooks, research director at City Index.
'If the vote passes then we could see the markets stage a relief rally early next week (we expect the vote to take place once the markets close for the weekend), while a defeat for the Trump administration could lead to another leg lower for risky assets.
'There are signs that we are moving to the next phase of the Trump trade,' she added. 'Now the market is unwilling to rally on pure faith that trump will fulfil his election promises; the market wants to see legislative action in Congress. The bar to another leg higher in the Trumpflation trade has just got a lot higher.'
Mike van Dulken, head of research at Accendo Markets, said Trump's ultimatum had set up markets for 'a dollop of weekend risk'.
'This would appear either fortunate timing for a successful vote tomorrow, restoring confidence in the Trump reflation trade, and a revival of risk appetite come Monday. Either that or an unfortunate result leads to more questioning about how much Trump will actually be able to deliver on.'
The FTSE 100 edged 13 points, or 0.2%, lower to 7,328 in a muted morning of trading. Smiths Group (SMIN) rose to the top of the index, up 3% at £16.03 after the engineering group reported a 27% jump in operating profits for the six months to the end of January.
The biggest mover on the FTSE All-Share was F&C Private Equity (FPEO ), which jumped to the top of the small cap index, up 5.9% at 316.2p after reporting a 23% jump in net asset value over 2016.