Pharmaceutical and tobacco stocks rally as blue chips fail to shine

FTSE: 5,996.01 (+32.21) Mid-250: 11,679.24 (+76.05) Small Cap: 3,276.91 (+9.02)DRUGMAKERS AND tobacco stocks led a defensive rally that enabled Britain's top share index to close higher yesterday.

The FTSE 100 closed up 32.21 points, or 0.5 per cent, at 5,996.01, but failed to break above 6,000 mark after London’s blue chips hit a two-week closing low on Thursday.

GlaxoSmithKline rose 1.4 per cent after Pozen said a federal court granted a preliminary injunction ordering Par Pharmaceutical not to develop and sell a generic version of Pozen’s migraine drug in the United States.

Regulatory exclusivity of Treximet, which is marketed by its US partner GlaxoSmithKline, expired yesterday.

Imperial Tobacco and British American Tobacco rose 1.9 and 1.3 per cent, respectively.

Goldman Sachs highlighted potential MA activity in a sector it views as inexpensive and underlevered.

“We could envisage a BAT (British American Tobacco)/IMT (Imperial) combination, albeit with some local business disposals,” the broker said.

Ladbrokes rose 7 per cent as the bookmaker walked from a possible takeover of online rival 888. William Hill added 5.7 per cent.

Global growth concerns lingered following a mixed start to the US quarterly reporting season, which saw some weakness in risk sensitive sectors such as banks and miners.

Banks were choppy as a US bank, Bank of America, posted an unexpectedly sharp drop in first-quarter earnings yesterday.

The euro zone debt crisis was back in focus after credit rating agency Moody’s cut Ireland’s sovereign rating to the verge of junk status.

Royal Bank of Scotland fell 2 per cent, but found support near its 20-day moving average of about 42p.

Miners fell as first-quarter GDP growth and high inflation in China raised expectations of further fiscal tightening from Beijing.

Vodafone rose 1.6 per cent after India’s Supreme Court asked the country’s tax office to restrain from enforcing penalties on Vodafone related to a tax bill over its 2007 acquisition of a controlling stake in a mobile firm.

Hedge fund manager Man climbed 4.2 per cent, bouncing off near technically oversold levels as BofA Merrill Lynch added the firm to its Europe One list. – (Reuters)