The pharmaceuticals group AstraZeneca rose as the benchmark FTSE 100 index fell back last night after being hit by renewed fears of monetary tightening.
Astra closed 28p higher at 2970p and GlaxoSmithKline edged up by 7.5p to 1294p after the US House of Representatives approved legislation extending healthcare to an additional 32 million Americans. Panmure Gordon estimated the cost to the sector to be in the region of 1.5 to 2.2 per cent of earnings per year for the first five years – but worries about the near-term impact on earnings took a back seat as the market focused on the long-term opportunity for pharma companies, which stand to benefit as volumes rise. Though they will have to pay out more in savings than originally agreed, the prospect of millions of new customers offset any concerns.
The pharma sector was also supported by sudden loss of the market's appetite for risk. India's decision to raise interest rates at the end of last week continued to unsettle the mood. Traders said the move, which came earlier than expected, had reminded the market of the looming threat of monetary tightening around the world.
The nervousness knocked the FTSE 100, which touched a session low of 5583.49 before recovering to 5644.54, down 5.58 points, at the close. The mid-cap FTSE 250 index was also weak last night, dipping below the 10,000 point mark with a loss of 27.85 points to 9991.92.
The miners were under pressure amid concerns that that a sudden shift to higher interest rates could threaten recovery. Eurasian Natural Resources Corporation closed 10p lower at 1150p, Lonmin fell 9p to 1982p, Xstrata lost 2p and closed at 1141p, while Kazakhmys was dropped 7p to 1476p. A round of bargain-hunting in the final hours of business limited the losses and helped parts of the heavily-weighted sector to close in positive territory. Anglo American, for instance, plunged 70.5p to touch a low of 2593.5p before recovering to 2684p, or 20p higher over the day. Fresnillo, which at one point was 26p lower at 801p, ended 3p firmer at 830p.
Over in the oil and gas market, crude prices fell as traders banked profits. This hit oil-related issues such as BP, which fell 5.3p to 629.8p, and BG, down 22p at 1180.5p. The explorer and producer Cairn Energy, which was cut to "hold" by Oriel, also came under pressure and shed 5.2p to close at 378.8p.
Lloyds stood out among the banks, adding 0.97p to 61.1p as buyers continued to pile in following its forecast of a return to profit this year. Not everyone was convinced, however, with JP Morgan repeating its "underweight" view, albeit with a revised 50p target price, compared to 44p previously. In the wider banking sector, Standard Chartered closed 14.5p lower at 1756p and HSBC fell 1.9p to 678.1p. Barclays was 4p behind at 353.6p after saying that it woild incur a £100m charge as part of a reorganisation of its activities, which will includes an exit from retail banking in Indonesia.
Elsewhere, Compass was among the shares that closed in the black. The catering company's stock rose 4.5p to 507p after analysts at Barclays Capital increased their earning forecasts to reflect recent foreign exchange movements. While reiterating its "overweight" view and raising its target price for the stock from 490p to 550p, the broker was also hopeful about next week's pre-close trading update, saying: "We expect upbeat commentary regarding margins and early indications of a recovery in top-line growth."
Further afield, the marketing group Aegis managed to firm up, adding 1.4p to 124.8p, despite Panmure Gordon switching its stance from "buy" to "hold" on the back of the recent update and the appointment of a new chief executive. "The appointment of Jerry Buhlman as group chief executive is not a positive catalyst for the shares," the broker said, scaling back its target price for the stock from 125p to 120p. "He is an insider, and therefore not an agent for change."
UBS was more positive, sticking to its "buy" view with Aegis's target price revised upwards from 140p to 155p.
On the downside, the utility support services group Spice fell by more than 6 per cent, or 2p, to close at 30.5p after analysts at Royal Bank of Scotland turned negative, revising their forecasts following a meeting with the firm's acting chief executive and moving the stock from "buy" to "sell".
"An initial review of the businesses by acting chief executive Martin Towers has resulted in a shift in the company's focus to organic growth, which we believe is long overdue," the broker said. "We continue to see opportunities for growth in the supply division, but the prospects for the utilities- facing distribution businesses are less clear in the short term given current retendering activity."
Rumours continued to flow around the stockbroker Collins Stewart, which supplemented earlier gains by adding 7p and closing at 86p. Speculators continued to pile in on hopes of some sector consolidation activity, with Australia's Macquarie being named as a possible bidder. Its sector peer Evolution, which was first named on Friday, and which fell by 2.1p to 118.5p last night, was also mooted as prospective merger candidate. A foreign bidder was seen as more likely.