FTSE Closes Flat as Pharma Helps Offset Banks

The passing of a US healthcare bill attracted buyers to pharma stocks on Monday, while Greece continued to weigh on financials

Holly Cook | 22-03-10 | E-mail Article

UK equities struggled for much of Monday’s session but had largely recovered by close of play, thanks to a higher start to the week on Wall Street, with European banks recouping morning losses as pharma plays in celebration mode.

The FTSE 100 index had closed just 5.6 points or 0.1% weaker at 5,644.5, having slipped to 5,583.5 in intraday deals, while the FTSE 250 index lost 34.7 points or 0.4% to 9,995.1.

European stock markets had started the week on negative terrain following a surprise interest rate hike from India that reignited concerns about the impact of governments withdrawing economic stimulus.

Also dampening economic sentiment were some muted words from Bank of England governor Mervyn King, who said in a speech today that the UK is likely to feel economically weak for some time to come.

Though only a little over a third of the FTSE 100 constituents made any headway on Monday, among them were a handful of heavyweights, including miner such as Rio Tinto, tobacco producer British American and pharma firm AstraZeneca. Offsetting these gains, however, were oil and gas plays Tullow Oil, BG Group and Cairn Energy, down 1.4%-2.0% as oil prices slipped amid fears changes to stimulus will reduce global demand for the black stuff.

The main blue chip casualty was interdealer broker ICAP, which lost 2.6% after announcing it is scaling back its European and Asian stockbroking business on the back of increased competition and reduced client trading. The change in strategy will cost the firm £51 million and result in 114 job losses.

British banks including Barclays and Royal Bank of Scotland, off 1.1% and 0.5% respectively, felt the pressure of ongoing apprehension surrounding the European Union’s plans to offer Greece a helping hand. Political news dominated the session after remarks from German Chancellor Merkel emphasising that providing assistance would be a last resort.

Also on the backfoot was building and plumbing materials supplier Wolseley, which lost 2.1% following downbeat comments regarding the company’s 2010 outlook after a substantial drop in trading profits in the first half of the year.

Despite the flat market close, investors appeared to be on the defensive as a number of stocks favoured for their ability to cushion losses in weak markets featured on the leaderboard. In addition to gains from tobacco producers and beverage manufacturers, pharma firms AstraZeneca and GlaxoSmithKline each added 1.0% and 0.6% after US Democrats overcame last minute changes and procedural moves to win passage of comprehensive healthcare legislation on Sunday. Healthcare stocks gained as uncertainty faded and companies looked toward the prospect of an additional 30 million customers.

Other climbers included Smiths Group, which benefitted from news it has acquired US company Interconnect Devices for $185 million. Shares in the London-listed industrial company closed up 2.5%.

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Holly Cook is Site Editor of Morningstar.co.uk and Hemscott.com. She would like to hear from you but cannot give financial advice. You can contact the author via this feedback form.
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