Drugs, energy stocks weigh on UK's FTSE
BUSINESS / 13 Dec '12, 1:29pmBy: Reuters
Weakness in drugmakers and commodity stocks pulled Britain's leading share index lower on Thursday as global growth concerns returned to the fore ahead of the year-end.
Moves by the US Federal Reserve reserve to implement new monetary stimulus measures were offset by concerns on the impact of austerity measures on the world's largest economy.
The Fed announced a new round of bond-buying on Wednesday and indicated interest rates would remain near zero until unemployment falls to 6.5 percent.
But Fed chairman Ben Bernanke warned that monetary policy won't be enough to offset damage from a “fiscal cliff” of steep tax hikes and budget cuts scheduled to kick in on January 1, negotiations over which are dragging on in Washington.
“Though encouragingly the Fed expanded its bond-buying programme, the move was largely expected and priced-in by markets,” said Ishaq Siddiqi, market strategist at ETX Capital.
“The delay by US lawmakers to reach an agreement to avert the fiscal cliff therefore prompts traders to shy away from risk.”
At 11:25 SA time, the FTSE 100 index was down 10.19 points, or 0.2 percent, at 5,935.66, having closed 0.4 percent higher at a fresh nine-month closing peak on Wednesday.
Falls by drugmakers were the main drag on the FTSE 100, accounting for over half of the index's total decline.
AstraZeneca lost 1.8 percent as it said an experimental rheumatoid arthritis drug proved inferior to Abbott Laboratories' Humira in a clinical study, knocking hopes for one of the few late-stage products in the company's pipeline.
Early volume in AstraZeneca was nearly 70 percent of its 90-day daily average in the first hour or so of trade, the biggest on the index, with overall FTSE volume at just under 9 percent.
Energy stocks, which had led the blue chips higher on Wednesday, were also a big weight on the index, led by a 1.1 percent fall for BG Group.
The energy firm named Chris Finlayson, currently managing director for its exploration arm BG Advance, as its new chief executive from the beginning of January, replacing Frank Chapman, who has had a 12-year tenure at the helm.
Oil services firm Wood Group was also a top blue chip faller, down 2.4 percent as it foresaw losses of around $20 million on a contract in Oman in the current year, although it added that it expects to deliver growth for the year in line with expectations.
Oil explorer Tullow Oil, however, bucked the sector trend, rallying 2.9 percent to top the FTSE 100 leader board, having led the fallers in the past few sessions after disappointing drilling news from Ghana, helped by vague underlying bid speculation, according to newspaper reports.
Gains by banks also provided some underlying support for the blue chip index, boosted by the Fed bond-buying moves, with some analysts also pointing to euro zone finance ministers agreement overnight to a deal on a banking union. .
“This potentially clears another hurdle in this financial turned sovereign debt crisis and sees the UK maintain safeguards,” said Mike van Dulken, Head of Research at Accendo Markets. - Reuters