A Switzerland national flag flies in front of a building of Novartis in Zurich. Novartis closed up 2.28% to 76.40 francs yesterday.
AFP/London
Huge deal-making in the pharmaceutical sector gave European stocks a shot in the arm yesterday, even though tension over the crisis in Ukraine lurked in the background, traders said.
Shares in European pharmaceutical groups surged owing to a major reshaping of the sector, driven by Novartis of Switzerland and GlaxoSmithKline in London.
London’s FTSE 100 gained 0.85% to 6,681.76 points compared to Thursday’s closing level—the last trading day before European markets closed for Easter.
Germany’s DAX 30 soared 2.02% to 9,600.09 points while the CAC-40 in Paris gained 1.18% to 4,484.21 points.
The euro rose against the dollar.
Wall Street was also firm, with the Dow Jones main index showing a gain of 0.59% and the Nasdaq index advancing 0.92%.
“The pharma sector stood out... on the back of news that two of the biggest players in the sector are making major changes to their business models,” said Farhan Ahmad, a trader at TradeNext.
At ETXCapital, strategist Ishaq Siddiqi said: “In Europe, worries about the crisis in Ukraine heating up are certainly not helping risk-sentiment but financial market participants are generally feeling upbeat on the back of some high-profile deal activity in the pharma sector.”
Market traders were also concerned about the outlook for growth in China, he said.
The latest takeover activity comes against a background of rising interest in acquisition opportunities in general, as businesses emerge from post-crisis risk-averse years with strong balance sheets and full war chests.
Another point of interest is the return of Portugal today to regular long-term bond issuance on its road to an expected exit from its EU-IMF bailout programme next month.
Swiss pharmaceutical giant Novartis and British group GlaxoSmithKline (GSK) announced a major shake-up of their healthcare divisions yesterday in deals worth billions of dollars.
It comes as reports over the weekend suggested that US pharmaceutical giant Pfizer was considering a $100bn takeover of British rival AstraZeneca.
“Pharmaceutical stocks have had a shot in the arm... on rumours of an impending takeover for AstraZeneca,” said Mike McCudden, head of derivatives at stockbroker Interactive Investor.
In London deals, AstraZeneca’s share price shot 4.72% to 3,960 pence and GSK rallied 5.20% to 1,640 pence.
Novartis closed up 2.28% to 76.40 francs after announcing that it would buy GSK’s oncology, or cancer treatment, business for $16bn (€11.5bn) in cash and sell its vaccines division, excluding vaccines for flu, to the British company for up to $7.1bn, also in cash.
The two companies also announced a joint venture to create “a world-leading consumer healthcare business”, focused on wellness, oral health, nutrition and skin health and expected to pull in around $10bn in annual sales.
In foreign exchange deals, the euro rose to $1.3795 from $1.3793 late in New York on Monday.
The European single currency fell to 82 British pence from 82.13 pence, while the pound advanced to $1.6821 from $1.6791 on Monday.
On the London Bullion Market, the price of gold fell to $1,282.50 an ounce from $1,299 on Thursday.
