Stock Commentary - Europe - week to July 3, 2006

EUROPEAN: bourses followed New York lower on the first day of the reporting period to July 3, with investors looking to the US Federal Reserve Bank's decision on interest rates, but then moved steadily higher, with all major markets closing on a significant rise. In FRANKFURT, Bayer benefited first from an upgrade by Bear Stearns, followed by positive comments on the chemical sector from analysts at ING. However, most of all, Bayer gained sharply on the news that it is selling its diagnostics business to German engineering group Siemens (see page 7) for some 4.2 billion euros ($5.27 billion), leaving the company - which is in the process of acquiring fellow German drugmaker Schering AG (unchanged on the week) 9.8% higher on the week. The ING chemical comments also boosted DSM on the AMSTERDAM bourse, where the stock rose 4.1% and outperformed the market.

LONDON: share prices moved higher on all but the first reporting day, lifted by merger talks mid-term. In terms of the Financial Times' pharmaceutical/ biotech index, this was among the best performing sectors on June 29, when it rose 2.7%. Recommendations on vaccines use by a US advisory panel (see New York column and page 18 this issue) helped drug major GlaxoSmithKline rise 3.2% on the week, because the company is also developing its cervical cancer vaccine, while AstraZeneca jumped 4.8% on no particular news. Little Acambis moved higher for another week, rising 7% overall, boosted by Goldman Sachs saying that the shares looked a "compelling buying opportunity" and Evolution Securities adding that, at current values, the stock looked "increasingly good value."