Market Report: Overseas prospects prompt Glaxo upgrade

Pharma stocks firmed up last night, with GlaxoSmithKline gaining 2.6 per cent or 26.5p to 1,058.5p, after a leading broker turned positive on the sector.

Morgan Stanley, which switched its stance on the sector to "attractive", said current valuations left room for improvement, highlighting four key factors which in its view make pharma stocks ripe for picking.

First, big players are moving to a more diversified business model, encompassing both a broader spread of assets and geographies, which should lead to "better earnings visibility and a more stable growth outlook". The second (related) point is the growth in healthcare investment in emerging markets. A broader geographic base should provide new growth opportunities, the broker said, adding: "From a top-down analysis, we calculate that the Bric countries [Brazil, Russia, India and China] will contribute an incremental $650bn to $700bn in healthcare spend over the next five years."

Third, the impact of the Obama administration's healthcare plans may not be as bad as feared by some in the market. The pricing pressures precipitated by any plan to increase coverage to the ranks of uninsured Americans will be mostly offset by the concomitant rise in volumes, the broker said. And finally, the sector stands to benefit from a more clement US regulatory environment, as various political and legal factors, including the rise of the Democrats and a recent Supreme Court decision to deny federal pre-emption on product liability claims, come together.

The assessment was accompanied by an upgrade for Glaxo, which was moved to "equal-weight" from "underweight". AstraZeneca, which is also rated "equal-weight" at Morgan Stanley, closed at 2517p, up 33p.

Overall, the market was generally quiet, with the FTSE 100 up to 4,461.87, up 25.12 points, and the FTSE 250 firming up by 24.46 points to 7,754.44.

Royal Bank Scotland was strong, rising to 39.7p, up 4.8 per cent or 1.8p, following reports that UKFI, the body responsible for taxpayer-funded stakes in the banking sector, was considering selling exchangeable bonds in RBS and Lloyds, which climbed to 66.7p, up 2.6 per cent or 1.7p, to recover part of the Government's investment in the two groups.

Barclays was 5.6 per cent or 16p stronger at 304.5p, as traders awaited news on the Barclays Global Investors sale. The stock also benefited from buying pressure precipitated by an index change, due to take effect from the start of business this morning, following the recent conversion of certain mandatory convertible notes by the Abu Dhabi royal family's investment vehicle.

Elsewhere, Invensys gained 5.5 per cent or 12.5p to 241.5p after Goldman Sachs moved the technology group's stock to "buy" from "neutral" in a capital goods sector review.

"Leading indicators suggest a stabilisation of the global business cycle, and our economists' 2010 global GDP growth forecasts are above consensus," the broker said. "Historically, turns in global leading indicators have preceded periods of both absolute and relative sector performance."

The engineering and construction group Balfour Beatty was 2.75p stronger at 339.25p, thanks to UBS, which raised its target price for the stock to 380p from 358p after returning from an investor day. "UK contracting is likely to shift from schools and hospitals to power, water and rail," the broker said. "The impact of a potential change in the UK government is a known unknown, with no clear policy goals signalled from the Conservative Party."

British American Tobacco remained firm, rising by 9p to 1,668p after JP Morgan reiterated its positive view on the global tobacco sector, saying: "The robust year-to-date tobacco performance, supported by pricing, reinforces our view that the stocks have upside, with downside limited by average dividend yields [of] over 5 per cent." Both BAT and Imperial Tobacco, which was up 4p at 1,611p, are rated "overweight" at JP Morgan, with respective price targets of 2,250p and 2,200p.

Also on the FTSE 100, the outsourcing group Capita managed to rise by 8p to 740p, despite a downgrade from Panmure Gordon, which switched its stance to "hold" from "buy" on account of valuation.

Further afield, on the second tier, investors moved to bank profits in Candover Investments, which eased to 293.5p, down 3.9 per cent or 12p after confirming it was in exclusive talks on the sale of its equity stake in Wood Mackenzie. Although the company did not name the suitor, recent reports have named Charterhouse Capital Partners as the most likely bidder.

On the upside, the engineering group Cookson was 5.7 per cent or 16p ahead at 296p after Citigroup, which hosted a one-day roadshow for the company earlier this week, reiterated its "buy" rating. "Management indicated that trading remained broadly unchanged vs that indicated with the May interim management statement. This reflects a still tough backdrop as Cookson had made minimal year-to-date profits in May, with [the Ceramics division] especially weak," the broker said. "However, equally, they are not seeing a sudden weakening of demand as has been seen at UK engineering peer Charter."

Start your day with The Independent, sign up for daily news emails
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

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

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...

Day In a Page

The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
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