Market Report: Gambling stocks buoyed by US breakthrough

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A bleak day for the London markets was given a lift by news that the American Gaming Association, the trade body of the US gambling industry, is to reclassify its position on online gambling.

The AGA, a powerful lobbying association, wants congress to look at regulation and taxation of the industry, a move in effect ending the prospect of legislation criminalising online gamblers.

The news was greeted enthusiastically by investors in London-listed gambling stocks, with PartyGaming and 888 Holdings, the two largest UK online gambling stocks, up strongly on good volume. Rumours over US prohibition of online gambling have consistently knocked the shares in the past few months, and sector bulls think that backing from AGA could give the industry a considerable long-term boost.

One trader said: "In the shorter term it is a relief rally but beyond that, if the US does decide to completely legitimise the industry, the possibilities for growth are outstanding."

PartyGaming ended as the best performer in the FTSE 100, after it gained 6.75p to 152.75p, a six-month high. 888 Holdings firmed 7p to 244p. The smaller online gambling stock BetonSports, which runs sports books on basketball, American football and baseball, also benefited, adding 9.25p to 169p.

Good results from AstraZeneca, Shire Pharmaceuticals and GlaxoSmithKline gave pharmaceutical stocks a boost. The sector has been a long-term market underperformer, with GSK in particular trading significantly below the 2,290p it hit soon after the merger of Glaxo and SmithKline in 1999. Its shares added 46p yesterday to close at 1,532p. AstraZeneca finished the session 64p firmer at 3,055p while Shire, after reporting a 46 per cent rise in first-half earnings, closed 12.5p better at 863.5p.

Good news was hard to find on a day when rising Chinese interest rates, Nigerian rebel links and dodgy Alaskan pipelines knocked the stuffing out of the mining and oil sectors. The index giants BP and Shell were sold heavily, with BP facing the prospect of failing corrosion and maintenance tests in Alaska, while Shell was reported to have admitted to subcontracting work to rebel Nigerian groups. The two stocks make up nearly 25 per cent of the FTSE 100, so with BP falling 14.5p to 683.5p and Shell declining 48p to 1,990p, it was always going to be hard for the index to trade in positive territory. The FTSE 100, which was in the red virtually all day, closed 44.3 down at 6,060.

Mining stocks also took a hammering, as traders took money off the table after China raised its interest rates. One metals trader said: "There is a huge amount of speculative money in the metal markets and in mining stocks. Any sign of an overheating Chinese economy is going to cause a little bit of panic selling, but for serious investors this creates a buying opportunity."

The copper minersKazakhmys and Antofagasta were the hardest hit, falling 37.5p to 1,168p and 110p to 2,358p respectively. But no mining stock was spared the carnage, with six of the top 10 fallers coming from the sector.

Among second-line companies there was corporate-activity rumours in the housebuilding sector, with traders saying that Crest Nicholson is poised to announce it has received an offer valuing its shares at 650p. Crest shares nudged 3p firmer to 535.5p, having traded 18.25p better earlier in the session.

The FTSE 250, having broken through 10,000 on Wednesday for the first time, fell 72 to close at 9925.6. With the sell-off in major oil and mining stocks there were few surprises in the list of major fallers, with Expro International, Premier Oil and Soco International following in Shell and BP's wake. Soco, which reported excellent drilling results from its Vietnamese operations on Wednesday, was 56p worse at 1,554p, while Premier Oil lost 43p to close at 1,037p. The oil services group Expro was the worst performer in the FTSE 250, losing 36p to close at 744p.

In the small-cap sector, Cardpoint confirmed it has received a bid approach, thought to be from a competitor that has been buying stock in the market through the broker Goldman Sachs. Its shares were well bid, adding 7.25p to 109.75p with 3.9 million shares changing hands. Meanwhile, market makers reported heavy buying interest in Corvus Capital, the latest stock-market vehicle of the colourful financier Andrew Regan. One market maker said the company is "one of the most undervalued stocks in the smaller end of the market" because of its 76 per cent stake in Commoditrade, 2.5p firmer at 19.5p.

Finally, the smaller gold mining stock Ariana Resources hit a new high, closing 3.25p better at 17.5p, on news that the company has discovered a significant new find at Kepez in Turkey.