Nothing to do with the Bull, it is purely aesthetical reasons. Bulls are color blind, they charge at things moving in front of them. After being speared with by the picador and banderilleros, the bull bleeds a lot, so if the cape was not red, you would be able to see the blood splashed over the cape, which is not appealing. If you notice, the first cape (capote) the bullfighter uses when the bull first comes out is not red but light pink and yellow on the back. They use this one first because is nicer, bigger and there is no blood; as soon as the bull receives the first cut, the bullfighter picks up the red cape.

Donald