By Carla Mozee, MarketWatch

LONDON (MarketWatch) -- Shares of Shire PLC and AstraZeneca PLC were under pressure Tuesday, as tax-inversion moves by the U.S. weighed on the merger prospects for the pharmaceutical companies.

Shire dropped 6.2%, and AstraZeneca (AZN) lost 5.1% after the U.S. Treasury on Monday issued new rules under the country's tax code, aimed at making so-called inversion deals more difficult to carry through and less profitable for the companies involved.

Under an inversion, a U.S. company reincorporates abroad to avoid U.S. taxes. The U.K. and Ireland are countries considered tax-friendlier than the U.S.

In July, U.S. drug maker AbbVie Inc. (ABBV) agreed to buy Irish pharma Shire, while British heavyweight AstraZeneca has been fighting off a hostile takeover from U.S.-based Pfizer Inc. (PFE) .

The U.K.'s FTSE 100 fell 1.1%, dropping alongside European markets after lackluster economic data from France and Germany.

Off the FTSE 100, shares of Tate & Lyle PLC sank 18% as the food producer cut it profit outlook, saying a harsh winter in the U.S. had hurt its business.

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