Stock Commentary - Europe - week to Jan 21, 2008

EUROPEAN: bourses started the reporting week to January 21 badly, with the ongoing credit crisis dragging banking sectors ever lower and health care losing what now seems to have been only a temporary haven as defensive stocks. However, there was no respite, as the indexes continued to see only one direction - down - with the last reporting day witnessing markets plunge as much as 7%. Ironically, this was when Wall Street - which had been fuelling much of the downturn - was closed for a public holiday. Not a single drug or biotechnology stock of those tracked registered a rise of any kind. The best performance came in ZURICH, where Actelion managed to stay unchanged ahead of reporting results (see page 6). Speedel plunged 18.1%. Of the drug majors, Novartis had a tough week, disappointing investors with its financial results (see page 5). Fourth-quarter 2007 profits were down a huge 42%, because of restructuring charges and a weaker performance in the USA. Roche was down a more modest 4.7%, seeing a negative impact from majority-owned US biotechnology major Genentech's results (Marketletter January 21). FRANKFURT was one of the most impacted market, with the Xetra Dax dropping 12.2% week-on-week. There, MorphoSys plunged 18.1%, Bayer fell 13.7%, while Merck KGaA was 6.8% lower.

LONDON: drug stock prices were also in negative territory, with majors AstraZeneca and GlaxoSmithKline down 3.9% and 9.1% respectively, largely as a result of a downgrade of European large capital pharmaceutical companies from Morgan Stanley. The former did better on an upgrade from Goldman Sachs, which said it is a compelling short-term buy.