Glaxo investigation weighs on Britain's FTSE

Wed May 28, 2014 3:32am EDT

* FTSE 100 dips 0.1 pct

* Glaxo falls after fraud office opens criminal investigation

* Weir gains after walking away from Metso

* Index in sight of all-time highs

By Alistair Smout

EDINBURGH, May 28 (Reuters) - British blue-chip shares dipped on Wednesday after domestic authorities launched a criminal investigation into the commercial practices of drug maker GlaxoSmithKline.

GlaxoSmithKline fell 1.5 percent on the fraud office probe, posing a new challenge for a firm that already faces claims of bribery in China and four other countries.

The fall in Glaxo trimmed 5 points off the FTSE 100, accounting for the majority of the index's fall. The pharmaceutical is the index's fifth biggest company.

Traders said that concern about the drug maker's practices was already well flagged, unlike other companies, and that after a weak opening, Glaxo could be poised for a recovery.

"There are plenty of companies not just in the pharma sector that will be investigated for unlawful practices... This may turn out to be a common theme across the industry," Atif Latif, director of trading at Guardian Stockbrokers, said.

"With the Serious Fraud Office investigation we think that now it is in the open the downside after the open may be limited."

Supporting the market, engineer Weir Group opened 1.8 percent higher after it walked away from a bid for Metso that its Finnish rival turned down, allaying concerns among investors that the UK firm might overpay.

The FTSE 100 index of British blue chips fell 7.01 points, or 0.1 percent, to 6,837.93.

The index rose 0.4 percent on Tuesday, and is now just 0.8 percent off May's 2014 high.

That peak is the last resistance level before all-time highs set in December 1999. Wednesday's move saw the index move within 1.6 percent of its highest ever level.

The FTSE is lagging other indexes including the DAX, which has already hit new highs for the year.

Valerie Gastaldy, who heads technical analysis firm Day By Day, said it was to early to tell whether the rebound on Tuesday was the start of a challenge for new 2014 highs, and noted that the move was made in low volumes.

"With those limitations, we do favour new high on the FTSE 100 at around 6,945 in June," she said.

(Editing by John Stonestreet)

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