Confidence wavers but the drug makers have the cure
RECENT confidence of a quick global economic recovery wavered yesterday, with commodity stocks down on weaker raw material prices but pharmaceuticals and telecoms gaining.
“The bulls have lost their swagger and after a week long stalemate, the bears appear to be winning the recovery debate. Financial markets have now broken out of last week’s unusually tight trading range, but unfortunately this break out is going in the opposite direction to the one most people want,” said David Evans, market analyst at BetOnMarkets.com.
The FTSE 100 closed 1.2 per cent, or 50.11 points, lower at 4,278.46.
Volumes on the British benchmark were about 91 per cent of its 90-day average daily volume.
Miners were the biggest drag on the index, although metal prices recovered earlier losses to trade up in the afternoon.
Antofagasta, Lonmin, Xstrata, Rio Tinto, Kazakhmys, Vedanta Resources and Eurasian Natural Resources fell 6.5 per cent to 10.2 per cent.
Softer crude also hurt oil producers, with BP, Royal Dutch Shell, BG Group and Cairn Energy losing between 0.8 and 3.6 per cent.
The number of Britons claiming jobless benefit rose less than expected in May but the rise was still enough to push the unemployment rate to its highest in more than a decade.
J Sainsbury was among the heaviest fallers on the index, down 5.7 per cent. Britain’s third largest grocer raised about £432m to accelerate its expansion, as it posted first-quarter sales at the top end of expectations.
The move to place new shares and convertible bonds also dragged on peers WM Morrison and Tesco, which fell 1.7 and 1.6 per cent respectively.
Banks were also weaker, with Barclays, Royal Bank of Scotland and Lloyds Banking Group down 2.5 per cent to 3.2 per cent. But HSBC advanced 0.7 per cent.
The UK index, which is down 3.5 per cent this year, has rallied 23.6 per cent since hitting a six-year trough on 9 March.
Defensive pharmaceuticals stocks were in demand on Wednesday, with Shire up 1.6 per cent on expectations its drug Replagal will benefit from production problems at US rival Genzyme.
Within the sector, AstraZeneca and GlaxoSmithKline added 2.5 and 0.7 per cent respectively.
Index heavyweight Vodafone, also seen as a defensive stock, put on 3.7 per cent.