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The beleaguered pharmaceuticals sector, dogged by recent concerns over drug safety, finally got a shot in the arm yesterday from the US regulator.
AstraZeneca rose 3.8 per cent to £21.52 after the US Food and Drug Administration said Crestor, its flagship anti-cholesterol drug, was no more dangerous than similar treatments made by competitors. See more on FDA and AstraZeneca and also Lex live on AstraZeneca
“This is unequivocally good news for the pharma sector as well as for AstraZeneca,” said Steve Plag of Credit Suisse First Boston, who upgraded Astra to “neutral” from “underperform”.
Analysts said regulatory risk now appeared substantially reduced and this helped lift GlaxoSmithKline, up 2.8 per cent at £13.18.
Along with a firmer oil sector, the gains in the pharma stocks helped drive a rally on the London market. With crude oil continuing to trade close to a four-month high, BP gained 1.2 per cent at 569p while Shell added 1.1 per cent at 500.5p and Cairn Energy edged 0.7 per cent higher to £12.49.
The FTSE 100 rose 0.4 per cent to 5,014.8, while the mid-cap FTSE 250 gained 0.2 per cent at 7,271.8. Trading volume was solid with 3.5bn shares changing hands.
However, strategists expressed caution about the impact on the market of rising interest rates. “Post the rise in bond yields, we estimate that equities have now moved broadly up to fair value,” said Graham Secker, UK equity strategist at Morgan Stanley.
“Investor fears over higher interest rates are also likely to have negative implications for two investment styles - high yield and mid caps.”
On mid-caps, Mr Secker noted they were more vulnerable to the impact of higher interest rates. Morgan Stanley estimated some 70 per cent of the FTSE 250 Index constituents could be classified as cyclical while only 20 per cent of the FTSE 100 could.
Mr Secker also said investors would be tempted to book profits in utilities given the sector’s bond-like characteristics after their strong run over the past year while the banking sector was likely to face increasing concerns over credit quality in addition to fears over higher interest rates.
Utilities, moved lower with National Grid Transco off 2 per cent at 494.75p, United Utilities down 2.3 per cent at 598.5p and Severn Trent 1.4 per cent weaker at 885.5p.
Rentokil rose 4.9 per cent to 170.25p with 25.6m shares traded, more than twice this year’s daily average. Dealers said one large buyer, rumoured to be a US private equity group, was responsible for much of the volume but were unclear as to the motive.
The support services group shares have risen on hopes that the new chief would pursue a radical break up. But at a recent meeting with analysts, this strategy was rejected.
Bunzl’s plans to demerge Filtrona, its supplier of cigarette filters and plastics products, to focus on outsourcing services, met with approval from UBS and Williams de Broe which both reiterated a “buy” recommendation. Bunzl rose 4.2 per cent to 528p.
Trinity Mirror rose 5 per cent to 719.5p as the media group and owner of the Daily Mirror newspaper produced a positive surprise with plans for a £250m share buyback along with better than expected full-year results. See more on Trinity Mirror
Yule Catto was the leading decliner on the FTSE 250, down 7.6 per cent at 280p as the speciality chemicals announced disappointing full-year results. Profits were hit by a combination of higher input costs and the weaker dollar.
Business Post Group rose 3.8 per cent to 695p after the express delivery group won a major contract to provide mail services to the Royal Bank of Scotland.
MFI Furniture fell 4.6 per cent to 128.25p as the furniture retailer’s latest trading update showed reassuring growth in UK retail orders but a slowdown in orders for its Howden Joinery business.
Record sales of replica football kit inspired by Euro 2004 and a new four-year sponsorship deal with Glasgow Rangers football club helped Umbro gain 2.2 per cent to 116p.
Airline stocks moved only marginally lower with British Airways off 0.3 per cent at 275.5p and Easyjet down 1.7 per cent at 228p. One analyst explained this was because fuel price surcharges had been effective in reducing airlines’ immediate sensitivity to higher fuel costs but earnings could come under pressure if oil prices stayed high beyond April.
Ryanair was unchanged at E6.02 in spite of an upgrade to “overweight” by JP Morgan after the budget airline’s secured a deal for some 300 new Boeing aircraft at well below the open market price.
Rio Tinto, the mining group, rose 2.6 per cent to £18.31 after Shanghai Baosteel agreed to pay 71.5 per cent more for iron ore products, in line with other recently announced contracts.
Aggreko increased 4.5 per cent to 172.5p after the a supplier of temporary power equipment reported a 6.3 per cent rise full-year profit-before-tax up 6.3 per cent to £42.6m from £40.1m and a 3 per cent increase in the dividend per share to 5.82p from 5.65p.
Minerva was 2.4 per cent higher at 275.5p after the property company said first-half profit-before-tax was at £1.3m from £0.6m in the s ame period last year. The property group also announced that chairman Sir David Garrard will retire at the end of March to be succeeded by chief executive Andrew Rosenfeld, a joint-founder of the company. See more on Minerva
Among the smaller companies, Asia Energy jumped 18.8 per cent to 776.5p after a bullish note from Cazenove on the mining company. The broker said even taking a conservative outlook on coal prices the stock’s net present value before equity dilutions should be £13.81, given its “potentially world class” Phulbari asset in Bangladesh.
Cambrian Mining, which owns 27 per cent of Asia Energy, rode 13.3 per cent higher on its coat tails to 212.5p.
UK Coal’s performance showed mining stocks are not a certain bet though. The company said operating losses in 2004 ballooned to £51.6m from £1.2m a year earlier, causing the shares to plummet 11.7 per cent to 117p.
ML Laboratories jumped 16.4 per cent to 21¼p after the board sacked executive chairman Stuart Sims. A large group of rebel shareholders had called for the removal of Mr Sims after the pharmaceutical company fell from a high of more than 300p. Rumours of a large institution buying at 20p helped draw in retail investors who chased the price higher by the close.
Asos, the internet retailer that is a favourite among small punters, fell 10.8 per cent to 58p after warning of disappointing full-year profits because of warehousing problems.
Evolution said the warning was a salutary reminder that small growth companies can suffer from growing pains. It said the valuation of Asos has been “way ahead of the game and it will come down to earth” with a likely floor of 50-55p.
Seymour Pierce said, however, Asos remains one of the fastest growing e-commerce plays in the retail sector.
QXL jumped 13.5 per cent to £14.35 after dependent directors of the internet auction site backed an increased £24m cash bid from Dutch company Florissant at £14 a share. The rise in the share price above that level indicates some speculation that a counter-bid is still possible. Florissant has been competing with an group led by QXL management.
Gaming Corporation rose 5.9 per cent to 15.75p after Canaccord Capital placed 71.5m new shares at 14p, raising £10m for the online casino operator. The new funds will be used to develop the company’s websites - which saw visitor numbers double in January compared with last September - and nascent mobile gaming business. Gaming Corp said it was in “advanced discussions” with mobile network operators.
Huntsworth and Incepta agreed an all-share merger, which would create a marketing company with a market value of around £200m. Incepta rose 2.3 per cent to 66p, while Huntsworth was unchanged at 21.5p.
Huntsworth said the merged group would make cost savings of at least £2.5m in the first year and its increased international reach would help to “attract and retain larger clients”. Incepta shareholders would have around two-thirds of the enlarged group.
Minister Pharmaceuticals was steady at 2.75p after it emerged Iraj Parvizi, a Dubai-based Iranian entrepreneur, had acquired 6.4 per cent of the company, a cash shell known as RII until a reverse takeover early this year by drug developer BioPartners.
Turbo Genset rose 13 per cent to 13p after the developer of power generation equipment announced it had received commitments for £7.1m of financing via convertible notes. The company said the capital would be used to support increasing orders.
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