Drugmakers give FTSE a lift as investors bet on healthcare

BRITAIN’S top share index ended up 0.3 per cent yesterday, led by pharmaceuticals on hopes that US President Barack Obama’s healthcare reforms could be hampered, while banks fell after results from US bank Citigroup.

The FTSE 100 index rose 18.75 points to 5,513.14, extending Monday’s gains when the market rose 0.7 per cent.

Pharmaceuticals echoed gains made by their US peers after latest opinion polls in the race for the vacant Massachusetts seat in the senate suggest local Republican state senator Scott Brown could defeat state Attorney General Martha Coakley.

A Republican win could hit the Democrats’ dominance in Washington and scuttle President Barack Obama’s top priority of sweeping healthcare reform.

GlaxoSmithKline, AstraZeneca and Shire rose 0.4-1.7 per cent on the back of the healthcare debate.
Democratic leaders crafting a final health reform bill have asked drugmakers to pay at least $10bn more to help fund the overhaul but no agreement has been reached, industry sources said.

“The healthcare issue has certainly excited the markets both here and in New York,” said Jimmy Yates, head of equities at CMC Markets.

The Dow Jones and S&P 500 were around 0.7 per cent higher as London closed.

“Better volumes after the US returned from its holiday on Monday has given us a clearer picture of sentiment among investors,” Yates said.

Commodities reversed earlier losses as investor appetite for risk returned.

Oil majors BP and Royal Dutch Shell gained 0.7 and 0.1 per cent respectively.

Miners joined the rally as platinum and palladium prices struck their highest levels since mid-2008 on Tuesday, with investment demand fuelled by the recent launch of exchange-traded funds in the United States.

Lonmin, Rio Tinto, Fresnilo, Xstrata and BHP Billiton added 0.1 to 0.8 per cent.

Cadbury was a big riser, adding 3.6 per cent after it recommended shareholders accept an offer from Kraft valuing the chocolate maker at around 840 pence per share or £11.9bn, plus investors will also get a 10 pence dividend. The deal ends a 5-month chase by Kraft.

Burberry was the strongest gainer, up 8.3 per cent after the luxury goods group smashed third-quarter revenue forecasts and predicted annual profit towards the top of market expectations.
Mobile phone heavyweight Vodafone provided the most strength for the blue chips, rising 1.3 per cent after recent weakness and helped by an upgrade in target from BofA Merrill Lynch.

On the downside, banks were the main drag on the UK blue chip index, as sentiment ebbed after Citigroup’s fourth-quarter results and ahead of Bank of America and Morgan Stanley’s results due tomorrow.

Barclays fell 1.8 per cent as Credit Suisse also cut its target price to 350 pence from 400.

HSBC, Lloyds Banking Group and Standard Chartered shed between 0.1 and 2.6 per cent.

Citigroup posted a $7.6bn quarterly loss on costs related to repayment of US Tarp aid and still high loan losses.

SABMiller was a big faller, down 2.3 per cent, after the brewer missed forecasts as it reported flat third-quarter worldwide underlying beer volumes amid varied regional consumer demand.