GlaxoSmithKline

“Investors are eagerly awaiting the FOMC meeting in the US later today to find out if there is going to be another interest rate hike. It increasingly looks like previous forecasts for one more hike this year and three in 2019 will have to be revised downwards. While we may get a hike today, concerns about global markets and tepid inflation in the US could see the Fed become more cautious about the pace of rate hikes in 2019. A fierce sell-off in oil prices in recent weeks amid fears over a supply glut adds to concerns about global economic activity. And a revenue warning last night from Micron Technology, a bellwether for the semiconductor industry, also adds to the gloom as consumer and business demand for phones and computers is weakening. Having suffered a big fall on Tuesday amid weakness in oil stocks and utilities, a small rebound in those two sectors plus strength in pharmaceuticals and banking help to lift the FTSE 100 by 0.2% on Wednesday. The UK domestic-facing FTSE 250 index didn’t fare as well, falling 0.1%,” says Russ Mould, Investment Director at AJ Bell.

GlaxoSmithKline

“Of the two big announcements on M&A activity in recent weeks from pharma giant GlaxoSmithKline there is no doubt which investors prefer.

“The proposed $5.1bn takeover of cancer drug maker Tesaro was met with raspberries, with concerns over the price tag and quality of the acquisition, but today’s big reveal of a joint venture with US rival Pfizer is proving far more popular.

“The combination of both parties’ consumer health businesses will create a market leader with brands like Aquafresh, Viagra and Anadin as well as £10bn in annual sales and is expected to result in significant cost savings.

“The positive reaction also likely reflects longer term plans for GlaxoSmithKline to spin off its consumer health business into a separate company.

“Demergers often result in positive stock market returns as they allow the unbundled firms more freedom and greater focus and often lead to value which was not recognised as part of a larger entity being factored in by the market.

“One slight issue is that Reckitt Benckiser (and Glaxo itself) walked away from a bid for Pfizer’s consumer health business nine months ago, raising some question marks over the strength of the portfolio.”

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