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
Arts and Entertainment
musicOfficial chart could be moved to accommodate Friday international release day
Wes Brown is sent-off
Italy celebrate scoring their second try
six nations
Glenn Murray celebrates scoring against West Ham
footballWest Ham 1 Crystal Palace 3
Arts and Entertainment
Drake continues to tease ahead of the release of his new album
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003
Barbara Woodward: Britain's first female ambassador to China intends to forge strong links with the growing economic superpower

Our woman in Beijing builds a new relationship

Britain's first female ambassador to China intends to forge strong links with growing economic power
Courage is rare. True humility is even rarer. But the only British soldier to be awarded the Victoria Cross in Afghanistan has both

Courage is rare. True humility is even rarer

Beware of imitations, but the words of the soldier awarded the Victoria Cross were the real thing, says DJ Taylor
Alexander McQueen: The catwalk was a stage for the designer's astonishing and troubling vision

Alexander McQueen's astonishing vision

Ahead of a major retrospective, Alexander Fury talks to the collaborators who helped create the late designer's notorious spectacle
New BBC series savours half a century of food in Britain, from Vesta curries to nouvelle cuisine

Dinner through the decades

A new BBC series challenged Brandon Robshaw and his family to eat their way from the 1950s to the 1990s
Philippa Perry interview: The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course

Philippa Perry interview

The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course
Bill Granger recipes: Our chef recreates the exoticism of the Indonesian stir-fry

Bill Granger's Indonesian stir-fry recipes

Our chef was inspired by the south-east Asian cuisine he encountered as a teenager
Chelsea vs Tottenham: Harry Kane was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope

Harry Kane interview

The striker was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope
The Last Word: For the good of the game: why on earth don’t we leave Fifa?

Michael Calvin's Last Word

For the good of the game: why on earth don’t we leave Fifa?
HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?