Drugmakers pull FTSE lower; banks, oils up

* FTSE 100 index down 0.2 percent

* Drugmakers weak; Glaxo falls on acquisition chatter

* Banks rise as stress tests reassure

* BP gains ahead of potential changes to management

By Tricia Wright

LONDON, July 26 (BestGrowthStock) – Britain’s top share index was
down 0.2 percent early on Monday, with falls by heavyweight
drugmakers offsetting gains by banks, as investors took some
reassurance from the outcome of European stress tests.

At 0832 GMT, the FTSE 100 (.FTSE: ) was down 8.60 points at
5,304.20, after it closed 1.19 points lower on Friday.

Strength was seen among banks, which bounced back after
declines on Friday, after the European bank stress tests showed
no nasty surprises.

Barclays (BARC.L: ) was the best off, adding 2.5 percent, with
Lloyds Banking Group (LLOY.L: ) and Royal Bank of Scotland (RBS.L: )
up 2.1 percent and 1.9 percent respectively.

“I think it’s quite easy to dismiss these stress tests as
being irrelevant, but actually I think they have provided an
element of their aim in terms of improving market confidence in
the sector so I think the market is seeing some relief,” said
Henk Potts, equity strategist at Barclays Wealth.

Only seven of 91 banks — five small Spanish banks,
Germany’s state-rescued Hypo Real Estate [HRXGe.UL] and Greece’s
ATEbank (AGBr.AT: ) — failed the tests, for an overall capital
shortfall of 3.5 billion euros ($4.5 billion).

The shortfall was much smaller than the 30-100 billion euros
predicted by markets, although many European banks have already
raised capital during the financial crisis, and there remained
some scepticism that the stress tests on European banks were not
strict enough. [ID:nLDE66M1T3] [ID:nLDE66M1A2]

Energy stocks were in demand led by BP (BP.L: ), up 2.1
percent, with the firm expected to announce changes at the top
on Monday, a day ahead of its second-quarter results, with the
anticipated departure of CEO Tony Hayward, who came under fire
for his handling of the massive oil spill in the Gulf of Mexico.
[ID:nN26145842]

“There’s some hope that management changes will draw at
least a line under part of the unhappy episode of their recent
crisis, and the company can move on from here, but there’s still
some significant uncertainties revolving around the company,”
Barclays’ Potts said.

Tullow Oil (TLW.L: ) was the biggest blue chip riser, up 5.4
percent, after the oil explorer said it had made a further oil
find in its deepwater Tano licence off the coast of Ghana.
[ID:nLDE66P086]

Among individual movers, Pearson (PSON.L: ) climbed 3.1
percent after the educational technology provider and Financial
Times owner firmed up its full-year outlook after a strong
first-half showing from all its units, with U.S. schools and FT
advertising returning to growth. [ID:nLDE66O086]

DRUGS WEAK

GlaxoSmithKline (GSK.L: ) fell 1.1 percent after the Wall
Street Journal on Sunday reported that the drugmaker made a
“very casual approach” to Genzyme Corp (GENZ.O: ), asking to be
notified if Genzyme considered selling itself. [ID:nN25160145]

Peer AstraZeneca (AZN.L: ) was also weak, losing 1.4 percent
ahead of its second-quarter results due later this week.

Consumer products group Reckitt Benckiser (RB.L: ) shed 1.5
percent after the release of second quarter results, with the
stock having put in a good performance ahead of the numbers
following last week’s takeover move for SSL International
(SSL.L: ). [ID:nLDE66P0I0]

On the second line, Connaught (CNT.L: ) plunged over 76
percent, topping the FTSE 250 (.FTMC: ) fallers board, as the
beleaguered social housing group says its net debt levels will
be significantly in excess of previously advised levels, and
will breach its banking covenants. [ID:nLDE66P0F7]

On the macro front, house prices in England and Wales fell
for the first time in 15 months in July, causing the annual rate
to weaken for the first time in over a year, property data
company Hometrack said on Monday. [ID:nLDE66M1LX]

No other domestic economic data will be released on Monday,
with little else due all week. The main focus will be on U.S.
second-quarter GDP numbers on Friday.

Stock Market Basics

(Editing by Mike Nesbit)

Drugmakers pull FTSE lower; banks, oils up