Stock Commentary - Europe - week to Oct 20, 2008

EUROPEAN: bourses experienced another roller-coaster week in the reporting period to October 20, as Group of Seven leaders discussed and then revealed plans to try to stabilize the chaos in financial markets, which is now leading to what is an inevitable recession. This was a week when several of the drug majors found their rightful positions as defensive plays, although the start of the third-quarter 2008 financial reporting season could have some negative results, and cause some nervousness ahead of, and after, figures are released. ZURICH saw a strong outperformance from Roche and Novartis, which gained 11.0% and 10.5%, respectively, compared with a market gain of 4.4%. These stocks, which have seen recent falls, also became the target of bargain-hunting. In STOCKHOLM, little Karo Bio outperformed, with a 2.3% week-on-week increase, and the firm's stock has risen more than 40% since it released results in August from a study showing that its novel lipid-lowering drug eprotirome in combination with Pfizer's blockbuster drug Lipitor (atorvastatin) decreased cholesterol more than the latter alone. This has led to speculation that the Swedish firm could become a takeover target for the US giant, and also for Anglo-Swedish drug major AstraZeneca. In PARIS, there was a strong showing from Sanofi-Aventis, which gained 13.4% against a 2.3% drop in the CAC 40, helped by negative news on a competitor drug to its big-selling anticoagulant Plavix (clopidogrel; see page 18). LONDON saw a mixed performance in the drug sector, with majors AstraZeneca and GlaxoSmithKline outperforming, with respective rises of 6.6% and 5.5%. Sinclair Pharma continued to fall, down another 27.7%, as hopes of a takeover faded.