By Carla Mozee, MarketWatch
U.K. stocks pulled out a win Wednesday, as a surge in biopharma company Shire PLC on deal buzz helped the blue-chip market shake off downside pressure emanating from tech stocks worldwide.
How markets moved
The FTSE 100 index (FTSE:UK:UKX) finished up by 0.6% at 7,044.74, led by utility shares, but commodity-related sectors led decliners. On Tuesday, it jumped 1.6% and ended a four-session losing streak.
But with one full trading session left in March, the blue-chip benchmark was still poised to fall 2.6% for the month, and has lost more than 8% this year.
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The pound (XTUP:GBPUSD) bought $1.4109, down from $1.4159 late Tuesday in New York.
What drove markets
The FTSE 100 staged a turnaround after falling as much as 1.1% during the session. That improvement came largely on the back of Shire shares , which rallied as much as 26% after Japanese biopharma Takeda Pharmaceutical Corp. (TKS:JP:4502) said it’s considering making an offer for its rival. Shire shares closed up 15.6%, the strongest percentage gain since June 2014.
Ratings upgrades for Burberry Group PLC and a couple of other companies by large investment banks also helped move the benchmark into positive territory.
But U.K., European (STOXX:XX:SXXP) and Asian (NIKKEI:JP:NIK) (HONG:HK:HSI) blue-chips had a rough start following the rout in tech stocks that led a sharp downturn on Wall Street on Tuesday and left the Nasdaq Composite Index (NASDAQ:COMP) down 2.9%. The tech-heavy Nasdaq was in the red during Wednesday’s session.
Investors dumped tech sector shares, which have been at the forefront of Wall Street’s run higher for more than a year, on various regulatory concerns including for electric car maker Tesla Inc. (NAS:TSLA) , and news that the U.S. is considering a ban on Chinese investment in certain sensitive technologies.
By contrast, reports that the U.S. and China are conducting behind-the-scenes trade talks helped drive a surge in London-listed blue chips on Tuesday, as concerns about a global trade war abated.
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But the FTSE 100 appeared able to shake off tech worries faster than other markets as the tech sector has a weighting of just 0.62% on index, with only two components in the group, according to FactSet data.
What strategists are saying
“Markets remain volatile, as another sharp swing lower on Wall Street tech stocks is driving equities lower and rippling through the asset classes,” said Richard Perry, market analyst at Hantech Markets.
He noted that the U.S. 10-year Treasury yield (XTUP:BX:TMUBMUSD10Y) has been pulled below a key near-term floor at 2.79%.
“All this noise can be distracting for traders, but the medium-term corrective trends on equities and longer-term bear move on the dollar continue. Market fears over a trade war are still present, and whilst this is the case, there will be a negative bias in markets,” Perry said in a note.
“While the integration of Baxalta is clearly giving Shire’s prospects a shot in the arm, ingrained concerns around generic competition and the net debt figure remain,” said Richard Hunter, head of markets at Interactive Investor, in a note.
“Nonetheless, there are a number of elements to the numbers which should provide some solace. Shire has 15 programs in late-stage development, product sales are strong – whether including the Baxalta contribution or not – and there are multiple near-term launches planned,” said Hunter.
Stock movers
Unilever PLC (LON:UK:ULVR) leapt 4.7% after UBS upgraded the consumer products heavyweight to buy from neutral and said a roughly 17% drop in its shares since October “creates a compelling entry point,” for investors.
Burberry (LON:UK:BRBY) gained 1.7% after the luxury goods maker’s rating was raised to buy from neutral at Goldman Sachs, which said Burberry is well positioned to benefit from a newly emerging “E-Concessions” distribution channel that’s focused on third-party online marketplaces and multibrand platforms.
Associated British Foods PLC (LON:UK:ABF) , whose operations include fast-fashion retailer Primark, ended 3.3% higher. Morgan Stanley lifted its rating to equal weight from overweight in the wake of a selloff in ABF shares in recent months.
Oil producers BP PLC (NYS:BP) and Royal Dutch Shell PLC fell 0.8% and 1%, respectively, as oil prices declined.
Among techs, shares of software maker Sage Group PLC (LON:UK:SGE) shed 0.8%, but business software maker Micro Focus International PLC turned higher to trade up 3.1%.
BT Group PLC (LON:UK:BT.A) ended up 1.6%. The shares were lower earlier after Ofcom, the U.K.’s telecommunications regulator, confirmed new rules aimed at boosting investment in full-fiber broadband networks. But it set a higher cap than previously outlined on the amount that BT charges to rivals to use its fast broadband service.
Data docket
British retail sales dropped in March, as snowy weather and brutally cold temperatures resulted in the first drop in sales since October, the Confederation of British Industry said Wednesday. The CBI’s retail sales balance came in at minus 8 in the year to March, as 40% of retailers surveyed said sales volumes fell while 32% said they rose.
“With many forced to work from home, telecoms firms saw record internet traffic, yet on-line shopping slowed sharply given the potential for disrupted deliveries,” said Ben Jones, CBI’s principal economist, in a statement.
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