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Defensives lift FTSE, M&A talk boosts tobaccos

Published 04/15/2011, 12:33 PM
Updated 04/15/2011, 12:36 PM
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* FTSE up 0.5 percent

* Glaxo, Vodafone benefit from respective court rulings

* M&A talks lifts tobaccos, bookmakers

By David Brett

LONDON, April 15 (Reuters) - Drugmakers and tobacco stocks led a defensive rally that enabled Britain's top share index to close higher on Friday.

The FTSE 100 closed up 32.21 points, or 0.5 percent, at 5,996.01, but failed to break above 6,000 after London's blue chips hit a two-week closing low on Thursday at 5,963.80

Technical analysts at broker Arbuthnot pointed to a resistance level forming around 6,050, 50 points off the 2011 high, which could prevent the index progressing too much higher in the short term.

GlaxoSmithKline gained 1.4 percent after Pozen Inc said a federal court granted a preliminary injunction ordering Par Pharmaceutical Cos Inc 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 U.S. partner GlaxoSmithKline, expires on Friday.

Imperial Tobacco and British American Tobacco rose 1.9 and 1.3 percent, respectively. Goldman Sachs highlighted potential M&A 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 in a note.

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

GLOBAL GROWTH CONCERNS

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

Banks were choppy as U.S. bank Bank of America Corp posted an unexpectedly sharp drop in first-quarter earnings on Friday.

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 percent, but found support near its 20-day moving average of around 42 pence.

Miners fell as first-quarter GDP growth and 32-month high inflation in China raised expectations of further fiscal tightening from Beijing.

"World economic growth continues to be on track. However, it is extremely unbalanced, which leads to a two-speed recovery," Stefan Angele, head of investment management at Swiss & Global Asset Management, which has around 80 billion Swiss francs of funds under management.

"The big questions remain whether all the challenges will be addressed and whether the solutions will match market participants' expectations. The uncertainty these open questions create leads to a very fragile environment."

Real estate investment trusts were lifted by a broadly positive note on the sector from JPMorgan, which kept its "overweight" stance on British Land and Land Securities, up 3.1 percent and 2 percent, respectively.

On the second tier, office landlord Derwent London gained 2.6 percent as the same broker raised its rating on the stock to "overweight" from "neutral".

Back among the blue chips, Vodafone rose 1.6 percent 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 Group climbed 4.2 percent, bouncing off near technically oversold levels as BofA Merrill Lynch added the firm to its Europe One list.

Gains on Wall Street as the UK market closed provided a boost for investors after encouraging U.S. economic data.

(Additional reporting by Tricia Wright and Brenda Goh; Editing by Jane Merriman)

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