Marcus Evans Group | Worldwide Headquarters | American Offices | Latin America | European Offices | African / Asian Offices

FTSE falls nearly 2.5% on US jobs and Greek worries, while AstraZeneca slides after Crestor trial

Leading shares fell nearly 2.5%, after poor US jobs figures and renewed worries about Greece prompted investors to bail out of riskier sectors such as mining and banks.

But another major faller was in the normally defensive sector of pharmaceuticals. AstraZeneca dropped 106.5p to 2809.5p, a 3.65% decline after a disappointing trial result for cholesterol drug Crestor, its biggest selling product. Crestor failed to beat rival Lipitor, produced by Pfizer, in a head to head trial known as Saturn, with results in the primary trial failing to reach “statistical significance.”

Further data and analyses will be presented in mid-November, but analyst Dr Mike Mitchell at Seymour Pierce said:

The wider commercial environment is seeing increasing pressure coming from payers to demonstrate clear benefits of therapies in order to justify high price tags. As Lipitor (atorvastatin) comes off patent towards the end of November, and the prospect of cheap generics beckons, the burden is on Crestor to demonstrate an unequivocal benefit over atorvastatin: on first view, this appears to be absent in terms of the primary measure within the Saturn study. We stay with reduce.

Navid Malik at Matrix also repeated a reduce recommendation:

We expect to see downgrades to Crestor sales in the market and are reviewing our sales estimates in light of this update.

News that no jobs had been created in the US in August, compared to expectations of a 75,000 rise, helped send the FTSE 100 tumbling 126.62 points to 5292.03 and souring a week which had started brightly. Wall Street was around 160 points lower by the time London closed, as investors moved to close positions ahead of Monday’s – ironically named – Labor Day holiday. Angus Campbell, head of sales at Capital Spreads, said:

Even though earlier in the week we’ve seen poor economic data being followed by a rally in equity markets as investors believe the likelihood of further quantitative easing from the US’s Federal Reserve is greater, today the number was so bad that it really added to the concerns that already haunt the market.

Barclays led the index lower, down 15.15p at 165.2p on a cocktail of concerns. Apart from the continuing uncertainty over whether UK banks’ investment and retail arms will be split, other negative news included reports the US planned to sue banks over their role in the sub-prime mortgage fiasco. On top of that, Eurozone worries resurfaced as an EU review of Greece was halted to allow the country more time to work on measures to boost growth.

Among the miners Anglo American lost 121.5p to £24.58 as its proposed joint venture with Lafarge’s construction materials business was referred to the Competition Commission.

But with gold moving sharply higher thanks to its status as a safe haven, Randgold Resources rose 275p to £66.70 and Fresnillo added 11p to £20.33.

Tullow Oil continued its recent gains following vague speculation of takeover interest from China National Offshore Oil Corporation, adding another 3p to £11.12.

Software group Sage edged up 0.1p to 255.5p on hopes that the cash investors receive from Hewlett Packard’s proposed £7bn purchase of Autonomy could find its way back into the sector. George O’Connor at Panmure Gordon said:

The Autonomy payback will need a home. Whilst the investors in Sage and Autonomy had traditionally come from different ‘camps’, this gap is being eroded by Sage’s new growth initiatives.

Supermarkets came under pressure following a negative note from Citigroup, which told clients it saw no reason to own the UK food retail sector over the coming months. The bank argued that leading supermarkets had opened too many stores during the boom times, and could suffer as the economy turns weaker. Analyst Alastair Johnston said:

Between 2007 and 2010 grocery spending in the UK grew close to 20% in real terms, on the back of surging commodity prices and sterling devaluation. For an industry accustomed to zero real demand growth, this was extraordinary. The Big 4 responded to the profit binge by ramping up space opening plans. As demand normalises (and looks set to deteriorate) this excess capacity is beginning to weigh on returns.

The cosy, consolidated UK food retail market is destined to turn ugly if the economy shuffles sideways Japan-style and capacity growth plans roll on as planned.

Citi cut its estimate for next year’s earnings at J Sainsbury by a hefty 9% and downgraded its shares, down 4.8p to 297.4p, from hold to sell. It kept its sell rating on Tesco, 5.85p lower at 375.05p, and moved from buy to hold on Morrisons, off 1.9p at 292p.

Morrisons, which reports half year results next week, also suffered from a sell note from Goldman Sachs. The bank said:

Morrisons’ share price has outperformed its food retail peers so far this year supported, in our view, by strong prints in the monthly Kantar grocery data and an expectation of continued margin progression from cost and productivity initiatives.

However we believe the market may have to wait for the full benefits of margin improvement as high petrol prices and continued gross margin pressure from food supplier inflation weigh on profitability in the first half. The risk of potential participation in the Iceland auction could also weigh on share price performance.

Home Retail ended 8.8p lower at 124.3p after UBS cut its price target from 140p to 130p, saying:

Argos’ profit in the first half could fall close to break even. Group interim profit could fall by around two thirds to £34m. With a potentially weaker than expected end to the second quarter we reduce our full year profit estimate by £10m to £140m.

The Christmas quarter at Argos (twice the size of the second quarter) remains key.

But ITE topped the mid-cap risers, up 14.7p to 184.8p. as Investec raised its recommendation on the exhibitions group from hold to buy.

Enquest fell 3.5p to 107.7p but could come under further pressure next week. After the market closed the oil company issued a disappointing update due to lower than expected production at the Conrie and Don Southwest fields in the north sea.

On Aim Cyril Sweett, a construction and property consultancy, lost 5.5p to 28.5p after it issued a full year profit warning, partly due to projects in the Middle East being cancelled due to the Arab spring uprisings. © Guardian News & Media Limited 2011 | Use of this content is subject to our Terms & Conditions | More Feeds