Sun, Nov 21, 2004 - Page 10 News List

European stocks sag on drug warnings


European stocks ended lower on Friday, with pharmaceutical stocks leading the retreat after a US Food and Drug Administration (FDA) official raised concerns about five medications on the market.

With few corporate announcements and little macroeconomic data to guide the market, attention was also fixed on the weakening dollar, which has broken through key levels versus both the euro and yen in recent days. According to analysts at ING Financial Markets, a weak US dollar has heightened concern regarding the outlook for activity in the euro zone and Japanese economies given the close link between exports and growth in both economies.

"Further comments in the wake of the G20 meeting over the weekend and central bank officials during the rest of the week, will therefore be keenly analyzed to see if intervention is becoming a growing possibility," they said in a research note.

The Dow Jones STOXX 600 Index, which tracks Europe's 600 largest listed companies, was down 0.7 percent at 247.82. The Dow Jones Euro STOXX Index, which tracks companies in countries that joined the common currency, was 0.6 percent lower at 237.46.

At the close of trading, London's FTSE-100 Share Index was 0.9 percent lower at 4,760.8, while in Paris the CAC-40 Index was 0.8 percent lower at 3,798.78. Frankfurt's Xetra Dax Index was down 1.0 percent at 4,134.89.

JP Morgan strategist Rahul Shah commented that the longer-term trends are still positive for equities. He said valuations look well-supported and the outlook for earnings growth remains positive.

"However, in the short term, a weaker dollar may send negative signals to investors," he cautioned.

The big story of the session centered on comments from FDA safety advisor David Graham, who suggested that the regulatory agency has been lax in assessing the health risks of five key industry drugs.

He named Crestor, a cholesterol drug made by AstraZeneca, Accutane, an acne drug made by Roche, and Serevent, an asthma medicine from GlaxoSmithKline, in his list of drugs that require stronger regulatory action.

In Paris, speculation and talks of mergers kept the market active, with Dexia topping the CAC, rising 6.25 percent to 17 euros on the news that it was in discussion with Sanpaolo IMI of Italy over closer cooperation, which could result in a merger. Sanpaolo IMI fell 3.1 percent to 10.21 euros in Milan.

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