World markets higher as euro fears ease

A successful Spanish bond auction and strong German economic data eased fears over the eurozone crisis and drove world markets higher today.

Sentiment over the state of Europe’s finances was boosted after German business and consumer confidence rose unexpectedly in December and the Spanish government saw its borrowing costs fall in a bond auction.

This helped the FTSE 100 Index rise 54.6 points to 5419.6 in a late rally despite pharmaceutical stocks acting as a drag after AstraZeneca revealed a twin setback to its pipeline of new drugs.

The drugs giant topped the fallers board with a drop of 44p to 2905p after it said that olaparib will not progress for further development in the treatment of ovarian cancer, while a potential anti-depressant drug is also unlikely to make headway.

The double blow will result in write-downs of $381.5m ($291m) and mean core earnings will now be in the lower half of market expectations.

Astra’s struggle to develop new blockbuster drugs also impacted on rival GlaxoSmithKline, which fell 5p to 1445p.

The drag from pharmaceutical stocks was partly the reason why the FTSE 100 Index failed to keep pace with gains elsewhere. The Dax in Frankfurt was ahead 3%, the CAC-40 in Paris was up 2.5%, and the Dow Jones Industrial Average in New York was 2% higher as the London market closed.

The pound was up against the dollar and the euro at 1.57 and 1.20 respectively after it was boosted by stronger consumer confidence figures from Nationwide and an improvement in retail sales.

The CBI survey suggesting that retail sales volumes rose for the first time in seven months in December helped boost the sector. B&Q owner Kingfisher rose 6p to 245.3p and Next was 28p higher at 2642p.

Outside the top flight, Sports Direct International shares fell 0.6p to 205.5p even though Seymour Pierce stockbrokers raised its recommendation on the stock from hold to buy and added £5m to its profit forecasts in the wake of strong half-year results.

But there was more misery for grocery delivery firm Ocado after its profits warning yesterday. Its shares fell 1.8p to 57.4p, or 3%.

Royal Bank of Scotland was down 0.3p to 19.7p after Chancellor George Osborne confirmed plans to force the bank to drastically scale down its investment banking arm and focus on the UK.

Shares in National Express were up 0.5p at 216.8p after the transport group said it had finished the year in “excellent shape” as it reported sales growth across all its divisions.

National Express said it was in line to meet full-year profit expectations as rail revenues are expected to have grown 6% this year, bus revenues are forecast to be 4% higher and coach revenues ahead 5%.

The biggest Footsie risers were Aggreko up 122p at 1970p, ITV ahead 3.2p at 64.2p, Kazakhmys up 35.5p at 886.5p, and Admiral ahead 33p at 833p.

The biggest Footsie fallers were AstraZeneca down 44p at 2905p and Essar Energy off 2.5p at 178p, Associated British Foods down 7p at 1093p and GlaxoSmithKline off 5p at 1445p.