Shire lost ground last night amid nervousness about American studies looking into the safety of the company's attention deficit hyperactivity disorder (ADHD) drugs.
American regulators are looking to into concerns over potential heart risks from the company's ADHD drugs, which account for a substantial chunk of Shire's revenues. Earlier this week, the US Food and Drug Administration (FDA), which was expected to issue results from studies looking into their impact on children and adults in August and October, said the reports had been pushed back and would not be out until the first quarter of next year.
Yesterday, analysts at Bernstein said that while they continue to believe that "things should be OK" for the drugs, they remain worried "by the small chance of a very bad outcome and wonder if the risk is being partly ignored, rather than priced-in".
"There has been much less market 'chatter' than we would have expected. We have had far fewer calls from nervous investors than we would have expected," they said, adding that, as a result, they were "uncomfortable recommending the stock until either the results of the FDA-sponsored studies are known, or the general level of anxiety increases". Given these concerns, Bernstein lowered Shire to "market perform" from "outperform".
Although supported by others – Bank of America Merrill Lynch, for example, said the delay in the results had created a buying opportunity ahead of next week's second-quarter earnings report – the assessment dampened the mood around the stock, which was 35p down at 1,455p.
Overall, the market was lower, with the FTSE 100 losing 55.93 points to 5,258 and the FTSE 250 shedding 125.45 points to 9,948.72, following confirmation of a slowdown in US growth. Official figures showed that the world's largest economy grew at annualised rate of 2.4 per cent over the second quarter after expanding at a revised rate of 3.7 per cent over the first three months of the year. Though somewhat offset by better-than-expected data on business activity in the American Midwest, the GDP data dampened the mood in dealing rooms on both sides of the Atlantic.
The figures weighed the mining sector, which was broadly lower as the demand outlook turned a shade darker. Hit by profit-taking, Xstrata was among the losers, shedding 16.5p to 1,015.5p. Anglo American, which reinstated its dividend after a two-year hiatus, was also held back, easing by 16.5p to 2,524.5p. Randgold Resources fared better, rising by 65p to 5,730p amid a rising appetite for gold, the traditional safe-haven investment during times of stress in the wider market.
The upside was dominated by utility stocks. News that France's EDF had agreed to sell its UK power-grid assets to the Hong Kong billionaire Li Ka-Shing for £5.8bn boosted the mood and sparked hopes of increased deal activity across the sector. United Utilities, which announced the sale of its stake in Meter Fit, was the biggest beneficiary, rallying by more than 4 per cent or 24.5p to 585p, while Severn Trent rose by 30p to 1,310p.
The banks were in focus as investors looked ahead to results from the UK players next week. Around Barclays, down 1.3p at 332.8p, traders highlighted a Citigroup note which said that the market may be overestimating the likely slowdown in the group's Barclays Capital investment banking business. "We believe that the top line revenues of Barclays Capital will hold up much better than the industry average," the broker said, repeating its "buy" view on the stock. In the wider sector, HSBC was 10.3p weaker at 646p, Standard Chartered lost 19p to 1,842p and the Royal Bank of Scotland was flat at49.96p. Lloyds managed to rise, however, firming up by 0.35p to 69.26p.
Elsewhere, the oil prospector Dana Petroleum was 1p better off 1,711p after announcing an oil-field discovery. On a more speculative track, rumours suggested that that Korea National Oil Corp, which recently raised its indicative offer proposal for Dana to 1,800p per share, was close to lining up the finance needed for a takeover of the FTSE 250-listed group.
Over in the housing sector, Berkeley was 10p lower at 810p despite a push from UBS, whose analysts said it was "the housebuilder to own through the cycle". The broker also repeated its positive view on Persimmon, which was 8.2p behind at 353.1p, Bellway, which was 8.5p lower at 579.5p, and Barratt Developments, which closed at 96.25p, down 1.85p. Bovis Homes, which was downgraded to "neutral" from "buy" at UBS, was 4.4p worse off at 343.8p last night.
Debenhams, down about 4 per cent or 2.6p at 61.5p, was seized upon by the bears after Panmure Gordon turned negative, warning clients that it saw a 10 per cent downside to its 58p target price for the retailer's stock.
The broker went on to lower Debenhams to "sell", and also switched its view on Marks & Spencer, which was cut to "hold" on valuation grounds. Panmure was keener on Next, which retained its "buy" recommendation. At the close, M&S was 6.8p behind at 344.4p, while Next was 11p down at 2,150p.
FTSE 100 Risers
British Airways 219.6p (up 3.6p, 1.7 per cent)
Gains ground after posting better than feared losses for the first quarter.
Fresnillo 1,031p (up 2p, 0.2 per cent)
Precious-metals miners attract interest as risk appetite eases on the back of US GDP figures.
BG 1,021.5p (up 8.5p, 0.8 per cent)
Overcomes weak market trend as bargain-hunters move into capitalise on the recent pullback in the shares.
FTSE 100 Fallers
BAE Systems 312.4p (down 7.7p, 2.4 per cent)
Nomura revises its target price to 410p, compared with 450p previously.
Wolseley 1,438p (down 15p, 1 per cent)
Retreats as US GDP figures confirm slowdown in growth during the second quarter.
Antofagasta 988p (down 9.5p, 1 per cent)
Mining sector pressured as demand outlook darkens on the back of US GDP figures.
FTSE 250 Risers
Dignity 703p (up 21p, 3.1 per cent)
Posts half-year results, revealing higher profits; raises its interim dividend by 10 per cent.
Easyjet 399.8p (up 3.8p, 1 per cent)
Sector cheered by the read-across from British Airways, which posts quarterly results.
Jardine Lloyd Thompson 590.5p (up 5p, 0.9 per cent)
Issues half-year results, revealing 14 per cent rise in pre-tax profits.
FTSE 250 Fallers
Homeserve 2,178p (down 123p, 5.3 per cent)
Declines after issuing an AGM statement; cut to "hold" from "buy" at Seymour Pierce.
Enquest 117p (down 3.9p, 3.2 per cent)
Falls back amid profit-taking as renewed takeover rumours fail to gain traction.
Fidessa 1,463p (down 40p, 2.7 per cent)
Panmure Gordon revises its recommendation to "hold", compared with "buy" previously.