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FTSE 100 drops as healthcare giants overshadow Fed-driven rally

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07/11/2019 | 12:08pm EDT
Traders work on the trading floor of Barclays Bank at Canary Wharf in London

(Reuters) - London's main index skidded for the sixth straight session on Thursday as investors sold off healthcare stocks after Washington withdrew a rebate rule aimed at lowering drug prices, and a Fed-fuelled rally fizzled out.

The FTSE 100 shed 0.3%, while the mid-cap FTSE 250 <.FTMC> capitalised on a rise in sterling to add 0.1%.

The U.S. government scrapped one of its most ambitious proposals for lowering prescription medicine prices, backing down from a policy that would have required health insurers to pass on billions of dollars in rebates they receive from drugmakers to Medicare patients.

"Overall, we view this outcome as a modest negative for the major pharmaceutical group," JP Morgan analysts wrote, adding that the move had removed a "potential positive catalyst" for the sector.

Pharmaceutical heavyweight AstraZeneca was by far the biggest drag on the blue-chip index, while peer GlaxoSmithKline also fell.

The Trump administration's move wiped out gains the market had posted earlier, as it cheered dovish comments from the U.S. central bank that reinforced bets of an interest rate cut and lifted broader sentiment.

Losses were stemmed by shares of homebuilders <.FTNMX3720>, which enjoyed their best day in nearly a month after a survey revealed the housing market had shown tentative signs of recovery in June.

Barratt, Britain's biggest housebuilder, surged 5.2% on its best day in more than eight months.

Reckitt Benckiser added 2.4% after it agreed to pay up to $1.4 billion to resolve all U.S. federal investigations in connection with the sales and marketing of Suboxone Film by its former unit Indivior.

"With this settlement, management draws a line under an issue that would, at best, have resulted in additional cost/distraction/uncertainty and could, at worst, have led to much more costly and protracted legal proceedings," Deutsche Bank analysts said.

Indivior soared as much as 41% after it raised its annual profit and revenue forecast in a separate statement as Suboxone lost market share at a slower pace than expected.

The small-cap drugmaker's stock pared gains after Washington's move to kill the drug rebate rule, and ended 7% higher.

The pound firmed after the Fed's indications of an interest rate cut weakened the dollar and helped the mid-cap index outperform the main bourse.

Diploma was the stand out mid-cap gainer after an earnings-accretive acquisition of fluid sealing products supplier Virginia Sealing Products.

The world's oldest tour operator, Thomas Cook, climbed more than 10% after peer and Jet2 owner Dart Group reported higher annual earnings as Britons booked more holidays. Dart shares were 4.5% higher.

(Reporting by Muvija M and Shashwat Awasthi in Bengaluru; Editing by Bernard Orr, Arun Koyyur and Frances Kerry)

By Muvija M and Shashwat Awasthi

Stocks mentioned in the article
ChangeLast1st jan.
ASTRAZENECA -0.33% 6369 Delayed Quote.8.63%
BARRATT DEVELOPMENTS 1.58% 644 Delayed Quote.39.02%
BERKELEY 1.04% 3795 Delayed Quote.9.43%
DART GROUP PLC 0.32% 780.5 Delayed Quote.1.10%
DIPLOMA PLC -0.27% 1478 Delayed Quote.22.15%
FTSE 100 INDEX 0.28% 7234.11 End-of-day quote.0.00%
GLAXOSMITHKLINE 0.40% 1653 Delayed Quote.10.96%
INDIVIOR 2.71% 43.55 Delayed Quote.-60.84%
RECKITT BENCKISER 0.05% 6586 Delayed Quote.9.43%
TAYLOR WIMPEY 1.61% 167.65 Delayed Quote.23.05%
THOMAS COOK GROUP -0.04% 4.712 Delayed Quote.-84.68%
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