US housing data provides uplift whilst AstraZeneca Suffers
German business confidence climbed in December, showing an unexpected second month of gains, according to the Ifo survey of 7,000 executives. The forecast had been for a drop to 106 (below November’s 106.6 level), but the data revealed an uptick to 107.2. Additional positive signs from Europe came in the form of a bond auction in Spain, the Spanish Treasury selling more than its maximum target of 3 month and 6 month bills at average yields of 1.735% and 2.435%. Whilst these are still elevated, they compared with yields of 5.11% and 5.227% (respectively) in November, representing a phenomenal decrease in borrowing costs in just over one month.
The news ensured modest gains across European indices, although the UK was a laggard given some stock specific troubles. News that Britain’s second biggest drug maker has suffered two setbacks in its late stage clinical pipeline, with drugs for depression and cancer failing to progress to the next stage of trails, weighed heavily on the company. It meant an immediate impairment charge of $318.5m with management subsequently suggesting that full year earnings were likely to come in at the bottom end of previous guidance. The disappointment was evident with the shares trading more than 2% lower. Similar failures at European pharmaceutical companies Sanofi-Aventis and Novartis highlighted the sector wide difficulties in replenishing expiring blockbuster drugs; the resulting negative sentiment hurt GlaxoSmithKline which was initially dragged lower by more than 1%.
The afternoon however saw housing data from the US which showed that the number of new residential buildings that began construction during November increase 9.3%. The numbers were well above expectations and the positive read across for the economy propelled equity indices higher, the S&P and Dow jumped 2% in early trade and were around 2.5% better off at the time of writing. The FTSE 100 climbed into positive territory to join its European peers (which were significantly higher with gains closer to 3%), ending the day 1.0%% higher at 5419. AstraZeneca remained at the bottom of the index although pared gains to finish the day down 0.3% at 2905p.