Drop in Glaxo weighs on Britain's FTSE 100

Thu Mar 20, 2014 4:55am EDT

* FTSE down 0.4 pct in early session trading

* Fall in Glaxo takes most points off FTSE 100 index

* Global stock markets also hit by Fed rate guidance

By Sudip Kar-Gupta

LONDON, March 20 (Reuters) - Britain's top equity index fell on Thursday, hit by a drop in drugs group GlaxoSmithKline and a slide in global stock markets after the U.S. Federal Reserve hinted interest rates could rise earlier than expected.

The blue-chip FTSE 100 index, which rose 14.4 percent in 2013 and came close to a 13-year high in January, was down by 0.4 percent, or 28.95 points, at 6,544.18 points in early session trade.

A 1.2 percent fall in GlaxoSmithKline took the most points off the FTSE 100, after an experimental cancer vaccine from Glaxo failed in a second test.

The findings showed that Glaxo's MAGE-A3 therapeutic vaccine did not help patients with non-small cell lung cancer in a late-stage Phase III study.

"With a further read-out pending, we are not pinning much hope on the product," said Panmure Gordon analyst Savvas Neophytou, who kept a 'hold' rating on Glaxo's shares.

Global stocks were also hit after Federal Reserve head Janet Yellen said late on Wednesday that the U.S. central bank would probably end its massive bond-buying programme this autumn, and could start raising interest rates around six months later.

The FTSE's latest dip pushed the index close to its lowest level since early February, and also sent it below its 200-day moving average, which currently stands around the 6,580 mark.

Technical traders often use the fact that an index has fallen below that 200-day moving average level as a sign of further weakness to come in the near term.

Many traders and analysts expect the FTSE to reach a record high of 7,000 points later this year as the UK's economic recovery slowly strengthens.

But some traders were more cautious about the short-term.

Hantec Markets analyst Richard Perry said that if the FTSE fell below the 6,500 mark, it could then retreat further to last month's lows of around 6,417 points.

"If that 6,500 level breaks, we'd be looking back to the lows of February," said Perry. (Editing by Catherine Evans)

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