Demand for drugs stocks ensured that, despite concerns over a possible global flu pandemic, the FTSE 100 ended up 11.02 points at 4,167.01.
GlaxoSmithKline (GSK), maker of the Relenza flu drug being stockpiled by the Government, was the top gainer, rising 57p to £10.63, despite brokers at Killik & Co dismissing the impact. They said it was likely to be insignificant since Relenza accounted for only 3 per cent of first-quarter sales. Others said that GSK’s plans for a bird flu vaccine would be transformational. Killik said that the pharmaceutical sector as a whole was due a bounce since investors had switched into more risky investments since the start of the year. AstraZeneca, due to issue third-quarter results on Thursday, rallied 89p to £24.83 in sympathy. Shire Pharmaceuticals firmed 15½p to close at 890½p.
Gains in the heavyweight pharmaceuticals sector more than outweighed losses in cruise, hotel and airline businesses. British Airways was most infected by flu fears, falling 12.7p to 151.2p, with fresh concerns that its merger with Iberia was heading off course, after the latter’s profit warning last week, also hitting sentiment. Carnival, whose Caribbean cruises stop off at Mexican resorts, was another victim, down 132p at £18.07. Evolution reiterated both “sell” advice on Carnival and its “reduce” rating on InterContinental Hotels, down 28½p at 643½p, saying that during the Asian Sars crisis some hotels in Hong Kong had been completely empty. Thomas Cook fell 12½p to 270¼p.
Away from the flu, National Grid was one of the top blue-chip gainers, amid hopes of an end to its debt worries. Shares in the operator of Britain’s gas and electricity networks, which have been hit by fears of a share issue to refinance its £20 billion debt, rose 23p to 558p as Iain Turner, of Deutsche Bank, urged clients to “buy”. He said that strong results next month should persuade ratings agency Moody’s to drop its “negative” credit watch rating – imposed in January after the Grid raised its dividend.
The utility is also holding an investor seminar, at which it is expected to reveal that regulators in the United States, where it owns electricity and gas transmission networks in Rhode Island and New York, have been allowing it to raise prices. Meanwhile, the rising dollar against sterling will help to flatter its US profits. The Grid has proved its credit-worthiness by raising £6 billion in debt since January last year even during the credit crunch, Mr Turner said.
Liberty International dropped 17¾p to 433¼p and after the market closed it announced a long-awaited placing and open offer to raise £500 million to £600 million. The family of Donald Gordon, the founder, will see its stake diluted, since it is not taking up its full rights. Segro fell 1p to 23½p after Arbuthnot slashed its profit forecast by 30 per cent and said that industrial landlords would be hit worse by the recession than office-builders.
ITV fell 1¼p to 31¾p. After the market closed, Moody’s cut its credit rating, saying that the indebted broadcaster was raising refinancing risks by refusing to do a rights issue.
— New York: Fears about the spread of the new, deadly strain of swine flu worried Wall Street, which sought out drug stocks and fled the Mexican peso. At the close the Dow Jones industrial average was down 51.29 points at 8,025.00.
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