Market Report: Drugs take the heat out of summertime rally

ANOTHER poor performance by drug shares probably stopped the FT-SE 100 index breaking through 3,000 points for the first time.

As Footsie continued its summertime record-breaking run, with a gain of 16.6 to 2,986.4, drug shares were afflicted by another rash of worries, falling to near their lowest levels of the year.

The opening of the anxiously awaited challenge in the US to the Zantac patents left Glaxo Holdings, producer of the lucrative anti-ulcer drug, 12.5p lower at 516.5p.

The once high-flying sector was also unsettled by President Clinton's narrow budget victory, which strengthens his hand over the proposed healthcare reforms, which are likely to squeeze drug profits. Talk of a meeting between the drug industry and Whitehall officials today was interpreted as evidence that the UK government may be moving to restrict drug profits.

It was enough to leave SmithKline Beecham 11p down at 438p, Wellcome 22p at 654p and Zeneca 6p at 650p. Medeva fell 5p to 111p.

But while healthcare shares suffered, most of the stock market was again in ebullient form, inspired by the seeming inevitability of lower interest rates and the continuing evidence that the economic recovery, although patchy, was clearly under way.

A modest French interest reduction helped sentiment; so did a strong New York opening.

Consumer shares were again significant beneficiaries, continuing to enjoy the market's strength since the virtual collapse of the exchange rate mechanism.

Beers made progress, with Scottish & Newcastle up 9p at 459p and Whitbread 'A' 13p at 520p.

Stores were led higher by Storehouse, up 7p at 218p, and Forte starred among leisure stocks with a gain of 6p to 225p.

But food retailers suffered fresh anxiety as stories swirled of a Monopolies and Mergers Commission examination of food margins and Smith New Court joined the bears feeding on the sector.

Asda fell 1.5p to 64p; Argyll 4p to 325p and J Sainsbury 6p to 465p. But Tesco bucked the trend, up 2p to 216p.

Williams Holdings, the conglomerate, edged forward 4p to 336p on vague stories that it had once again been ensnared by the demerger fashion. One idea was that its locks side would be floated. Williams has illustrated its awareness of demerger attractions. In October, 1989, it hived off its garages group, Pendragon.

Insurance shares firmed ahead of figures this week. General Accident, reporting today, gained 5p to 692p. An interim profit of pounds 120m is expected against a pounds 21.2m loss. Commercial Union, which should turn an pounds 18.1m loss into a pounds 53m profit on Wednesday, gained 7p to 660p and Royal Insurance put on 3p to 247p ahead of an expected pounds 45m profit against a pounds 79m loss on Thursday.

Banks were also spurred by profit hopes. Standard Chartered, due to announce interims on Thursday, gained 12p to 896p. A figure of pounds 170m compared with pounds 63.6m is likely.

But British Airways exhibited nervousness ahead of today's first- quarter figures, falling 4.5p to 335.5p.

Vodafone had another good session, up 13p to 509p. US support remains strong. The shares continue to look cheap compared with American cellular valuations and the suspicion remains that a leading US group, such as AT&T, will be tempted into a takeover strike.

Cable and Wireless rose 13p to 824p and BT 3.5p to 427.5p. The partly paid BT shares improved 3p to 183p.

BT's strength occurred despite the increasing likelihood of more profit downgradings. Many of the investment houses involved in the Government's successful pounds 5bn share sale are expected to look again at their estimates in the next few weeks.

Alexon, the fashion group, held at 60p. Its pounds 16.4m rescue rights issue flopped. Underwriters have been called into action. With most shareholders ignoring the call, it achieved only an 18.74 per cent take-up.

Oceana Consolidated, stalking the Etam fashion chain, rose 5p to 95p as Charles Stanley, its stockbroking subsidiary, sold a 10.21 per cent stake held by a Japanese group.

The newcomer Bakyrchik Gold, one of the most unusual flotations for years, scored a handsome premium, closing at 146p against a 120p placing by the stockbroker Williams de Broe. The company, headed by the former Aberdeen Petroleum chief David Hooker, intends to develop a gold mine in Kazakhstan. There are suggestions that it will have to make a cash call before its mine starts production.

Another record session. The FT-SE 100 index climbed 16.6 points to 2,986.4 and the FT-SE 250 index 6.6 to 3,399.4. Turnover was 525.3 million shares with 34,200 bargains. The account ends on Friday with settlement on 23 August. Government stocks were little changed.

There was fresh talk that Bass will buy a host of Chef & Brewer pubs from Grand Metropolitan. Grist for the mill came from the sale of 44 Bass pubs to Greene King for pounds 17.5m, just two weeks after the pounds 40m disposal of Augustus Barnett. Grand Met, which also announced a distribution deal with Chile's leading wine producer, rose 14p to 433p. Greene King added 2p to 557p and Bass firmed 3p to 479p.

Smith New Court has cut its profit forecast for Manchester United because of the club's expensive new recruit Roy Keane. The pounds 3.75m outlay on the Nottingham Forest man has pushed transfer spending above the SNC estimate. The securities house is, therefore, cutting its expectation from pounds 5.3m to pounds 3.8m. But, as SNC observes, the market accepts such volatility. United shares gained 3p to 438p.

Dealings are due to start today in Fortune Oil, formerly Blackland Oil. Shares were placed at 3.5p to finance the pounds 26.7m reverse takeover of Kingsleigh Petroleum, a Hong Kong company. The deal brings a number of leading state- owned Chinese groups into Fortune, which trades in oil with China. A lively return is expected with some talking of the price doubling from the placing level.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Tax Manager / Accountant

£35 - £50k DOE: Guru Careers: A Tax Manager / Accountant (ACA / CA / CTA) is n...

Ashdown Group: Contracts Executive - City of London

£35000 - £37000 per annum + benefits: Ashdown Group: Contracts Executive - Cit...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree Group have been well esta...

Recruitment Genius: Call Centre Debt Collector - Multiple Roles

£21000 per annum: Recruitment Genius: This is an exciting opportunity to join ...

Day In a Page

Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

US betrayal of old ally brings limited reward

Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
VIPs gather for opening of second Suez Canal - but doubts linger over security

'A gift from Egypt to the rest of the world'

VIPs gather for opening of second Suez Canal - but is it really needed?
Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
The male menopause and intimations of mortality

Aches, pains and an inkling of mortality

So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

'How can I possibly be on the list with these writers I have idolised?'

Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

Bettany Hughes interview

The historian on how Socrates would have solved Greece's problems
Art of the state: Pyongyang propaganda posters to be exhibited in China

Art of the state

Pyongyang propaganda posters to be exhibited in China
Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

Vegetarian food gets a makeover

Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks
The haunting of Shirley Jackson: Was the gothic author's life really as bleak as her fiction?

The haunting of Shirley Jackson

Was the gothic author's life really as bleak as her fiction?
Bill Granger recipes: Heading off on holiday? Try out our chef's seaside-inspired dishes...

Bill Granger's seaside-inspired recipes

These dishes are so easy to make, our chef is almost embarrassed to call them recipes
Ashes 2015: Tourists are limp, leaderless and distinctly UnAustralian

Tourists are limp, leaderless and distinctly UnAustralian

A woefully out-of-form Michael Clarke embodies his team's fragile Ashes campaign, says Michael Calvin
Blairites be warned, this could be the moment Labour turns into Syriza

Andrew Grice: Inside Westminster

Blairites be warned, this could be the moment Labour turns into Syriza
HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

The mystery of Britain's worst naval disaster is finally solved - 271 years later

Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

'I saw people so injured you couldn't tell if they were dead or alive'

Nagasaki survivors on why Japan must not abandon its post-war pacifism
Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

The voter Obama tried hardest to keep onside

Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen