FTSE on track for 1.7% weekly loss as worry points pile up, relief for GSK’s Zantac legal battle

“It’s not been the best of weeks for the FTSE 100, with the UK blue-chip index on track to end the five-day session down 1.7%. Inflation, interest rates, politics, declining commodity prices, rights issues, the list goes on and it is fair to say the market has had quite a bit to worry about,” says Russ Mould, Investment Director at AJ Bell.

“Risk appetite has diminished judging by what’s moving on the market. Utility stocks rebounded after yesterday’s sell-off triggered by National Grid’s rights issue and whether a Labour government might nationalise the country’s key utility providers. That was the only sector in demand on Friday, pretty much everything else in the FTSE 100 went into reverse.

“Weak retail figures shouldn’t have surprised given the miserable weather we’ve had for much of 2024. No-one wants to go to the shops if it is pouring with rain and messages from many of the quoted retailers in recent months have implied that life is particularly tough for them, not helped by consumers still feeling the pressure of high interest rates.

“The sooner interest rates are cut, the better, as far as investors are concerned. Not only should that make consumers feel a bit more confident about their finances, but it should also put businesses in a stronger position to increase investment. It could improve investor sentiment and see greater risk-taking. That is all theoretical, nonetheless, and we could easily see a situation where everyone realises that one or two rate cuts aren’t enough to move the dial.”

GSK

“The threat of multi-billion-dollar payouts have hung over GSK for some time but slowly the clouds are parting.

“A court in Illinois has rejected an individual’s claim that GSK’s heartburn drug Zantac caused them cancer. This follows approximately 50,000 cases being dismissed in December 2022 and a settlement last year, all relating to Zantac lawsuits.

“While concerns about the scale of any potential payout caused a sharp decline in GSK’s shares two years ago, the market has since taken the view that any financial hit will be manageable and we’ve seen a sharp rebound in the share price. It’s also helped that the business has been doing well financially and strategically, including positive steps achieved on the drug development front.

“The legal battle is still playing out, but GSK must be feeling more confident given the latest court ruling and the fact a second case in Illinois due to go to trial has been dismissed.

“In a worst-case scenario, GSK will take a big financial hit and investors will stop fretting, such is how the market has reacted to other big companies when faced with large compensation payouts or settlements.”

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