Market Report: Investors hold steady during Ireland's woes

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The Independent Online

Pharmaceutical companies managed to defy warnings over the global sector's long-term prospects, providing a bright spot during a cautious session for the blue-chip index.

Moody's stated its negative outlook for the pharmaceutical industry in a report published yesterday, blaming its "increasing exposure to major patent expirations".

Marie Fischer-Sabatie, a senior analyst for the ratings agency, added that "regulatory hurdles remain high for new drugs" and said cutbacks in drug spending "is accelerating in Europe as governments grapple with massive fiscal deficits".

However, GlaxoSmithKline ignored the analysts and climbed 29.5p to 1,243p, following the news that its new lupus drug had been approved by an advisory panel to the Food and Drug Administration in the US. Benlysta, the first drug of its kind in more than 50 years, now only needs final approval from the FDA itself.

Analysts welcomed the latest development, with Charles Stanley's Jeremy Batstone-Carr forecasting that the drug should contribute $2bn in sales by 2018. Also up was AstraZeneca, which was the subject of reports earlier this week that it was considering selling its Swedish unit Astra Tech; it put on 9.5p to 3,037.5p.

Overall it was a quiet session, as investors waited for a conclusion to Ireland's economic problems. "Everybody's just marking time a little bit now the Irish situation has moved on," said IG Index's chief market strategist, David Jones. "There was a lot of confusion about Ireland earlier this week... Now it's looking like it's moving forward one way or another, everyone is just waiting to see what is going to happen."

With fears remaining over China raising its interest rates, and latest UK unemployment figures showing a slight fall in those out of work, the FTSE 100 stuck close to its starting position for most of the day, but rallied near the end and finished up 10.66 points at 5,692.56.

The biggest riser of the day was Experian, after it released its first-half results. The consumer credit rating company took the opportunity to increase its interim dividend to 9 cents a share, and jubilant investors lifted its price 44.5p to 748p.

There were a number of companies going ex-dividend yesterday, many of whom made up the day's major fallers. Vodafone, down 3.5p to 166.95p,J Sainsbury, down 6p to 367.7p, and Marks & Spencer, down 11.8p to 384.2p, were some of the major names, with the latter taking the wooden spoon.

Also falling was Centrica, whose third-quarter results failed to prevent it being knocked back 1.2p to 332.2p. The owner of British Gas, which is to raise gas prices by 7 per cent, predicted full-year operating profits would beat forecasts. Yet Bank of America Merrill Lynch said that despite the numbers holding "some encouragement, we think that more meaningful positive news is required to prompt significant upside".

On the FTSE 250 the news that BSkyB's chief executive Jeremy Darroch said yesterday that the company may make "sensible bolt-on acquisitions" led to speculation that TalkTalk Telecoms could fit the bill. Traders were dismissive, however, with one pointing out that as the only standalone broadband company on the FTSE 350, TalkTalk often gets linked to the major players. The idea of Vodafone as a potential buyer was also revived, but despite the bid gossip – which included a vague sum being tossed around of 195p-a-share – TalkTalk failed to catch fire and it slid 2.8p to 150.2p.

Sparking more interest was Premier Foods, which pushed up towards the top of the mid-tier index. The maker of Hovis bread confirmed that it had "received approaches that may or may not lead to a sale" of its East Anglian canning unit, and the market clearly thought it was good news, with the group's shares making 0.68p to finish at 18.09p.

Imagination Technologies fell again, shedding 21.5p to 303.5p. Its retreat came after the chip maker announced that it had agreed to buy the American technology firm, HelloSoft, in a deal that could cost as much as $47m. Funding for the purchase was helped yesterday by Imagination's placement of 12.2 million shares at 310p each.

Among the small-caps, Northern Foods – whose brands include Fox's biscuits and Goodfella's pizzas – revealed that it had agreed a merger with the Irish company Greencore to create a new company called Essenta Foods. The announcement was welcomed by Panmure, which said that it "makes a lot of sense", although the broker did note that the "key question will be whether the new group ... will lose any significant volume from retailers 'rebalancing' their supply".

Northern Foods surged 11.25p to 56.5p, and there was some talk about a third party taking the opportunity to jump in and make their own bid, with Credit Suisse one of those floating the idea. However, traders played down the chances of this happening, saying that the main reason behind its rise was the claim that the proposed merger will produce savings of £40m a year.

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