Britain's top shares reversed to halt a two-day recovery on Monday as GlaxoSmithKline dipped on concern about a key drug and a robust defence strategy by Marks & Spencer cut the chance of a take-over, dealers said.
Shares in clothing retailer M&S dipped 1.1 percent to 364 pence after it said it would return 2.3 billion pounds ($4.3 billion) to shareholders and sell its financial services arm. Entrepreneur Philip Green has proposed a take-over offer worth 400p a share for M&S.
"Overall we would view the changes as positive and the likely result of the current take-over battle probably having swung in favour of the current M&S board," Iain McDonald, analyst at Numis Securities, said in a research note. "Consequently, this may have the effect of depressing the share price in the short-term."
The FTSE-100 share index ended down 33.2 points, or 0.8 percent, at 4,360. The fall wiped out most of a modest rise over the past two trading days, and tugged the index back towards last week's 3-1/2-month low of 4,324 points.
The FTSE-250 index outperformed its blue-chip rival and ended barely changed, helped by a 32 percent surge by property group Minerva after it confirmed it was in early talks about a possible take-over.
Speculation that other property firms could be ripe for consolidation and growing confidence in a recovery in London rents helped Land Securities and British Land each rise about 0.6 percent and boosted mid-cap Shaftesbury 4.8 percent.
But overall turnover was moderate and traders said the market's recent downward trend resumed amid worries that second quarter earnings from US companies - starting this week with results from heavyweights such as Intel - may not live up to expectations.
"There's not going to be the kind of significant beating of numbers that we had in the first quarter as a lot of people have raised their numbers," said Nigel Cobby, managing director of European equities at J.P. Morgan.
"But we still have a decent background for equities relative to bonds and cash," he added, suggesting that quarterly earnings for S&P 500 firms should rise about 27 percent on the year.
Europe's biggest drug maker GlaxoSmithKline lost 1.9 percent after analysts at Smith Barney cut their price target on the stock and Deutsche Bank said an "abrupt slowdown" in sales of GSK's leading drug Advair indicated that consensus sales forecasts for the asthma treatment were too high.
Rival AstraZeneca shed 1.7 percent, as dealers said concern about its cholesterol drug Crestor continue to linger. The drugs sector took eight points off the FTSE's value.
Drugs wholesaler Alliance UniChem fell four percent as talk died down about a possible bid approach, which had boosted its shares at the end of last week.
But Capital Radio, the mid-cap radio station operator, rose 5.5 percent following an upbeat note from its house broker Cazenove together with vague speculation of a merger with rival GWR Group. GWR added 3.4 percent.
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