Fresh Ukraine tensions dent FTSE, but healthcare stocks keep market up

Thu Apr 24, 2014 11:34am EDT

* FTSE 100 index up 0.2 pct, well off earlier highs
    * Russia says starts military drills near Ukrainian border
    * Bid speculation boosts healthcare stocks

    By Tricia Wright
    LONDON, April 24 (Reuters) - Fresh tensions in Ukraine took
their toll on Britain's top shares on Thursday, wiping out much
of the day's gains, although expectations of deal-making in the
healthcare sector kept the market buoyant.
    The FTSE 100 was up 15.69 points or 0.2 percent at
6,690.43 points as of 1512 GMT, having hit a six-week high of
6,724 earlier in the session.
    Darkening the mood, Russian Defence Minister Sergei Shoigu
was quoted by the Interfax news agency as saying that Russia had
started military drills near the Ukrainian border in response to
operations by Ukrainian forces against pro-Russian separatists
and NATO exercises in eastern Europe. 
    The news prompted investors to lock in profits on a rally
which earlier in the session saw the FTSE 100 break through the
top of the range in which it has traded in the last few weeks,
where the peak was 6,706 points.
    "We are obviously still looking at an uptrend for the FTSE,
but until we get a daily close through that key resistance
metric, then you are probably going to see a sideways to
downside bias," IG chief market strategist Brenda Kelly said.
    
    M&A PROP
    Smith & Nephew, Europe's largest maker of artificial
hips and knees, led the blue-chip gains by rising 3.4 percent
after medical device maker Zimmer Holdings Inc said it
would buy orthopedic products company Biomet Inc. 
    The acquisition - the latest in a burst of deal-making and
bids in the healthcare industry aimed at either gaining scale or
specializing in certain disease areas - supported a long-held
view that Smith & Nephew might itself become a target.
    Trading volume in Smith & Nephew was strong, at around four
times its 90-day daily average, contrasting with the FTSE 100 on
about two thirds.
    "The whole healthcare industry is about to go through a
massive phase of consolidation; Smith & Nephew has always been a
potential target of bid speculation," Joe Rundle, head of
trading at ETX Capital, said.
    AstraZeneca, meanwhile, climbed 3.1 percent to a
record high, extending this week's strong advance on Pfizer's
 reported interest. 
    Britain's second-biggest drugmaker made no reference to the
Pfizer bid talk in its results statement on Thursday, noting
progress with new cancer drugs that might revive its fortunes as
it posted a 17 percent fall in core earnings per share.
    The cancer drugs are seen as a big draw for the U.S. group.
 
    Analysts at Deutsche Bank said the figures looked consistent
with full-year guidance and, to a degree, represented the calm
before the storm as comparisons should worsen from the second
quarter, adding that much of the focus in AstraZeneca remained
on deal making.
    Trading volume in AstraZeneca came to about twice its 90-day
daily average.
 ($1 = 0.5960 British pounds)

 (Editing by Hugh Lawson)
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