Pharmaceutical Sector Drags the FTSE Lower as US Treasury Limits M&A Possibilities

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Pharmaceutical Sector Drags the FTSE Lower as US Treasury Limits M&A Possibilities

Pharmaceutical Sector Drags the FTSE Lower as US Treasury Limits M&A Possibilities



The FTSE 100 has fallen after shares in major pharmaceutical organisations suffered due to regulations that reduce the likelihood of a US takeover.

New rules have been brought into immediate effect by the US Treasury Department that reduce the benefits available to American companies that agree tax inversion deals by relocating their headquarters abroad.

As a result, both Shire, which is in the process of being acquired by US organisation AbbVie, and AstraZeneca, which has rejected an offer from American company Pfizer, have seen their shares fall.

As of 1:30pm BST, AstraZeneca was down 5.51%, while Shire was the biggest faller on the FTSE with a drop of 5.91%.

This has contributed to the index dropping 1.65% to 6,661.89 points overall.

Other factors that have had a negative influence on the FTSE include reports that have indicated a slowdown in German manufacturing and a further contraction in French business activity.

Miners Trade Against the Negative Trend

Only five organisations on the index have seen their shares increase today and these were all mining organisations.

The biggest risers were Randgold Resources (up 1.29%) and Fresnillo (up 1.19%).

Rio Tinto (up 0.77%), BHP Billiton (up 0.29%) and Glencore Xstrata (up 0.19%) also saw their shares increase.

Mining shares had fallen yesterday due to concerns over Chinese manufacturing data, but today's gains suggest these worries may not be as serious as first assumed.

Other news that is likely to weigh on the FTSE is negative UK public finances data that has been released by the Office for National Statistics.

The figures show public sector net borrowing has increased around 6% over the past 12 months

Samuel Tombs, an economist at Capital Economics, stated: 'August's public finance figures show that the coalition is still struggling to bring borrowing down as quickly as planned in the March Budget.

'Thankfully, the poor borrowing trend is almost entirely due to weak annual growth in income tax receipts, which we suspect will be temporary.'




By Jonathan Sudaria, 23 September 2014


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