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The UK's biggest drug companies are already feeling the side-effects of President Obama's move to revive the US economy by cutting the country's huge Medicaid budget.
Obama wants to cut payments to medical insurance plans and target high drug prices to save money. That could hit the big drugmakers. GlaxoSmithKline fell 32p to 1048p while AstraZeneca plunged 141p to 2216p and Shire dropped 45½p to 844p.
America is still the biggest and most lucrative export market for Europe's drug producers, accounting for more than half their sales. Any move to cut back spending will only add to their woes. The drug firms have been floored in the past few years by the growing cost of research, increased regulation and litigation and intense competition from generic drug producers.
The task of discovering and developing blockbuster drugs has forced them to change tactics. Most have switched to acquiring smaller research companies or forming joint ventures.
In a separate blow, AstraZeneca has been asked by the US Food & Drug Administration for more information on Seroquel XR, its treatment for schizophrenia and bipolar disorder. Panmure Gordon said the move was not unexpected but will be seen as another setback for Astra. It hopes the company will be able to provide the information without more tests.
Share prices generally gave back all of yesterday's gains — and then some more — in the wake of a late sell-off on Wall Street last night. The S&P 500 future crashed through the 740 support level this afternoon, sparking a further round of share-dumping in London. The FTSE 100 index responded by dropping back through the 3800 support level with a loss of 148.73 at 3766.91. Bank shares again provided the focus of attention, Lloyds Banking Group tumbling 19.2p to 55.8p after failing to agree terms over its plans to dump billions of pounds of toxic assets into the Government's rescue scheme.
That news emerged as Lloyds revealed losses of almost £11 billion at its HBOS subsidiary, with which it was saddled by the Government last September.
Royal Bank of Scotland, which yesterday reported £24 billion of losses, fell 4.9p to 24.1p as more than 160 million shares changed hands. Other banks and life assurers also gave back some of yesterday's gains, which dealers said were generated by hedge funds squaring up their short positions. Barclays fell 18.9p to 94.1p and HSBC, reporting next week, dipped 33¼p to 493¾p. Among the life assurers, Legal & General dropped 6.2p to 38.3p, Friends Provident 7.8p to 69p and Prudential 27½p to 277½p.
UBS has raised its rating on DSG International, down 1.5p at 20.5p, from neutral to buy ahead of publication of the retailer's recovery plan next week. The broker has also lifted its target from 18p to 28p following news of a sales rise of between 15% and 25%.
Deutsche Bank is warning of a big drop in consumer demand it says will last until 2010. It says this will affect the likes of Marks & Spencer, down 13¼p at 251¼p, which it has cut from hold to sell, and Next, 50p adrift at 1140p, dropped from buy to hold.
But Deutsche has raised its rating on Signet, off 4p at 131¼p, from hold to buy while jacking up its target by 300p to 975p. It argues Signet should be a beneficiary of a major reduction of capacity in jewellery retailing and an earlier cyclical recovery in the US.
Goldman Sachs says it prefers mining stocks with the strongest returns profiles and the greatest discretion over the use of their cash inflows. It adds that companies investing in growth projects through the trough of the cycle can reap super-normal returns when demand recovers, and it believes BHP Billiton, down 77p at 1078p, is in exactly this position.
Goldman has raised Anglo American, 55½p softer at 970½p, from neutral to buy while downgrading Kazakhmys, off 24¼p at 254p, from buy to neutral. Rio Tinto, down 92p at 1782p, is cut from neutral to sell.
