News Column

Daily Mail, London, market report column

August 21, 2014

By James Salmon, Daily Mail, London

Aug. 21--The fact that two out of the nine members of the Bank of England'sMonetary Policy Committee voted to hike interest rates last month may not seem like earth-shattering news. But those dabbling in the stock markets saw it as a signal that an interest rate rise is back on the cards later this year.

For the wonks following the machinations of the MPC, this was an exciting day indeed as it was the first time the committee had been split since July 2011.

The prospect of a rate hike prompted housebuilders Persimmon and Barratt Developments to lose some of the ground they gained earlier this week. They fell 27p to 1323p and 9p to 359.6p respectively, which helped to drag the FTSE down 23.83 points to 6,755.48. Commercial property firm Hammerson also slipped 13p to 601.5p.

The concern is that a rise in interest rates could take the heat out of the property market by making houses less affordable, both for first-time buyers and those looking to remortgage.

This fear was voiced by the Council of Mortgage lenders as it revealed gross mortgage lending hit pounds sterling 19.1bn in July, the highest since August 2008.

It cautioned that 'intensifying affordability pressures' through rising house prices and rising interest rates could 'dampen this upward trend.'

The pound rebounded from a four-month low against the US dollar, rising 0.3pc to $1.668. It hit a four-month trough of $1.6602 earlier in the day its lowest since early April.

But by the early evening the gains had been largely erased as investors reflected on Tuesday's sharp fall in inflation, which indicates that interest rates are unlikely to rise any time soon. The pound was last trading at $1.6645, up 0.2pc on the day. Burton-on-Trent drug maker Clinigen jumped more than 11pc or 45.5p to 446.75p on its acquisition of the global rights of cancer drug Ethyol from AstraZeneca. Ethyol is designed to reduce the occurrence of dry mouth in patients undergoing post-operative radiation treatment.

It is also used to treat the build-up of toxins in the kidneys that is often suffered by ovarian cancer patients who have used chemotherapy drug cisplatin.

Revenue from Ethyol in 2013 was approximately $4.9m, but Clinigen has not disclosed how much it is paying AstraZeneca for the rights. Nonetheless, investors and analysts were impressed, with Stefan Hamill from Peel Hunt arguing the acquisition 'fits well into the portfolio, bringing its cancer supportive care portfolio to three and its total portfolio to five products'.

On the other end of the spectrum yesterday was London listed Jordanian drugs-maker Hikma Pharmaceuticals.

The firm, which produces a wide range of drugs treating anything from diabetes to skin disease, reported a 44pc jump in first-half profits to $176m.

But it cut its sales growth forecast for branded drugs due to shipment issues in some North African markets.

Given the Middle East and North Africa accounts for 40pc of Hikma's branded drugs sales, shares fell 6pc to 1692p.

Investors in Balfour Beatty did not react kindly to its decision to reject Carillion's sweetened pounds sterling 2.1bn takeover offer.

The deal would have given Balfour's shareholders a greater 58.2pc slice of the merged company.

Carillion said that this proposal would see the value on offer rise by pounds sterling 286m from pounds sterling 1.8bn to pounds sterling 2.086bn.

But Balfour has disputed the figures and argues that the deal is not nearly as sweet as it appears. Its argument, which prompted Carillion to abandon its pursuit, did not appear to pass muster with its own investors. Balfour shares tumbled 6.7pc, or 17.1p, to 238.9p.

Gem Diamonds sparkled yesterday, with shares jumping 4.9pc or 13.75p to 221.5. Profits more than doubled to pounds sterling 11.8m as it was boosted by big finds at its mine in Lesotho.

Insurance and telecoms outsourcing firm Quindell enjoyed another day of strong gains, jumping 7.8pc to 210.25p, ahead of today's interim results. This follows a 16pc surge on Tuesday. It may use today's results to hit out at what it believes has been a concerted smear campaign against its business model.

Standard Chartered's investors are a stoic bunch. They were unmoved on Tuesday when reports surfaced that it was facing a $300m fine from the New York banking watchdog for sloppy anti-money laundering controls. Shares barely budged, up 3.5p to 1221p, after the firm was confirmed, alongside a range of other tough sanctions.


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Source: Daily Mail (London, England)

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