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LONDON (Alliance News) - Pharmaceutical companies are leading UK stocks higher Tuesday, with the sector buoyed by merger and acquisition activity and speculation.
With little in the way of economic data to provide focus, and in the absence of a further deterioration of the political situation in Ukraine, investor sentiment remains positive. European equity indices are higher across the board Tuesday after investors return from the long weekend.
By mid-morning Tuesday the FTSE 100 is up 0.9% at 6,681.70, the FTSE 250 is up 1.0% at 16,071.33, and the AIM All-Share is up 0.6% at 834.37.
A similar picture within major European markets sees the French CAC 40 up 0.6%, and the German DAX up 0.9%.
The FTSE 350 Pharmaceuticals & Biotechnology sector has jumped almost 6%, with the gains led by AstraZeneca amid speculation that the UK drug maker may receive an increased takeover offer from US peer Pfizer. AstraZeneca has already rejected a takeover offer of USD101 billion, according to weekend press reports.
AstraZeneca shares are leading the FTSE 100, up 7.3%, on market speculation that Pfizer is likely to return with an improved offer. Citigroup has raised the stock to Buy from Neutral Tuesday.
GlaxoSmithKline is providing its own boost to the pharmaceutical sector, with its shares up 5.5% following the announcement of a series of strategic deals with Novartis AG to create an expanded consumer healthcare and vaccines franchise and to exit its oncology portfolio. "In a surprising move, GSK has entered into a series of acquisitions and divestments with Novartis which will strengthen these leading franchises while divesting the underperforming oncology franchise," says Shore Capital equity analyst Brian White.
The boost to the sector also sees Shire and Hikma Pharmaceuticals up 4.3% and 4.9%, respectively, Thursday.
The mining stocks are providing the biggest drag to UK indices Tuesday, with the FTSE 350 sector down 0.6%, led lower by Anglo American, which is down 1.5% amid reports that the company is in talks with the South African government to try to withdraw from its deep platinum mines at Rustenburg. The move would be driven by continued disruption following three months of labour strikes in the region.
Despite a number of deaths in Ukraine over the weekend amid continued tension with Russia, European markets have so far shrugged off the latest developments, preferring to focus on the corporate news. US Vice President Joe Biden on Tuesday promised economic and political support to Ukraine, and warned during a visit that the country needs to fight corruption.
Berenberg chief economist Holger Schmieding suggests that after a good first quarter of European economic activity, the modest setback to economic confidence caused by the Ukraine situation so far is bearable, although a further deterioration could be a different story.
"Truth is the first casualty of war. From afar, we cannot fully judge what is happening. Unfortunately, the chain of events over the last three weeks and the Russian 'reporting' about Ukraine could be consistent with the risk scenario that Russia is trying to create a pretext for open armed intervention," said Schmieding. "Actual war in the neighbourhood, or the threat of war hanging like a sword over Europe, could make for a bigger setback," the economist says.
Alpari chief market strategist James Hughes says "the on-going crisis between Russia and Ukraine remains the story that investors must keep one eye on to protect themselves from any kind of unexpected market moves."
Eurozone construction output increased by 6.7% year-on-year in February, slowing from a rise of 8.8% year-on-year in January. On a monthly basis, construction activity in the region grew at just 0.1% in February, slowing from 1.5% in January.
With little else in the data calendar, there has been very little movement in the major foreign exchange pairs so far Tuesday. Against the dollar, the pound continues to trade at a near multi-year high of USD1.6820, while the euro trades at USD1.3800.
A European consumer confidence survey due at 1400 GMT may provide some market interest, with economists expecting the reading to slip slightly to improve slightly to -9.05 in April from -9.30 in March. At the same time, US existing home sales data is due.
By Jon Darby; jondarby@alliancenews.com; @jondarby100
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