Britain's top share index recovered from earlier losses to inch higher at the start of the week as cyclical sectors made a comeback, though the UK market lagged European benchmarks and Shire was a loser among health stocks. The blue chip FTSE 100 index ended 0.1 percent higher at 7,389.46 points, having hit a new seven-week low, while mid caps gained 0.4 percent.
The UK lagged European markets which made a robust recovery, shrugging off the breakdown of coalition talks in Germany. Strength in sterling put pressure on the index's dollar-earnings constituents. "I think for the moment people are still fixated on progress in negotiations between the UK and the EU ... the currency reacts to that most quickly," Stephen Macklow-Smith, head of Europe equity strategy at JPMorgan Asset Management, said.
"There is scope for sterling to bounce if we get a fairly benign deal, and that would then translate to some rotation within the market, because when sterling weakens, overseas earners do well," Macklow-Smith added. Though individual stock moves were in general fairly muted, shares in health firm Shire fell 2.7 percent, the biggest FTSE fallers.
Shire's stock was down in a readacross reaction from some positive drug trial results for Swiss peer Roche, whose shares jumped 6.5 percent. Shares in AstraZeneca also edged 0.2 percent lower. Cyclicals made a recovery after a weak start. Materials and industrials stocks added the most points to the index, while heavyweight financials HSBC, Prudential and Standard Chartered remained muted, down 0.3 percent to 0.4 percent.
Commodities stocks recovered after early weakness. Oil majors BP and Royal Dutch Shell edged up 0.1 to 0.4 percent, while miners Anglo American and Glencore also pulled out of an early dip, gaining 1.4 to 1.5 percent as copper prices edged higher. Health stocks were also strong movers on the mid-cap index . Hikma shares jumped 5.9 percent, while Spire Healthcare sank 9.5 percent after South African private hospital group Mediclinic said it would not make another offer for the company.
Shares in Mediclinic fell 2.4 percent on the FTSE 100. TalkTalk shares sank 4.5 percent after Citi lowered its price target on the stock, saying the company may need to further cut its dividend in order to stay within debt covenants. Shares in Thomas Cook, however, climbed 5.2 percent thanks to some supportive broker action.
HSBC started its coverage of Thomas Cook with a "buy" rating, while Panmure Gordon & Co raised the stock to "hold" from "sell". "Tour operators have been on the winning side of incredibly polarised share price performance across the Travel & Leisure sector this year," analysts at Panmure said in a note. Thomas Cook's shares have risen nearly 35 percent so far this year.
"(Thomas Cook's) shares have performed strongly on increasing confidence that consensus earnings expectations have stabilised, after three years of decline," Panmure analysts added. Industrial component distributor Diploma jumped 10.7 percent, helping mid-caps and blue-chip industrials outperform, after the firm reported a 19 percent rise in full-year profit.