FTSE 100 falters as Aberdeen and Royal Bank of Scotland fall back

Pharmaceutical deals were in focus, in a market which drifted lower amid continuing geopolitical tensions.

Reckitt Benckiser rose 135p to £52.05 as the company behind Cillit Bang and Durex condoms reported a 3% rise in second quarter revenues and said it planned to spin off its pharmaceutical business.

Meanwhile GlaxoSmithKline dipped 8.5p to 1414.5p despite chief executive Sir Andrew Witty telling the Financial Times he was open to the idea of demerging its consumer healthcare business. The company lost early gains after analysts at Bank of America Merrill Lynch moved their recommendation from buy to neutral.

AstraZeneca slipped 31p to £43.61 even though it unveiled deals with Roche and Qiagen to develop two separate diagnostic tests to identify patients who would benefit from its lung cancer treatments. The Qiagen agreement involves a test to accompany AstraZeneca's established lung cancer pill tressa, while the arrangement with Roche relates to tressa's experimental successor known as AZD9291. Savvas Neophytou at Panmure Gordon said:

AstraZeneca is progressing rapidly with its plans of creating AZD9291 into a mega blockbuster with news this morning of a ground breaking peer-to-peer interaction with Roche. The plans are to develop companion diagnostics for AZD9291 which we find reassuring given Roche's leadership position in diagnostics. Developing a companion diagnostic for AZD9291 is critical towards precipitous commercialisation of the product which remains one of the great white hope's of AstraZeneca's oncology pipeline with some $3bn peak year revenue slated in the company's defence documents [against the bid from Pfizer] in May.

Overall the FTSE 100 struggled for direction for much of the day before finishing 3.48 points lower at 6788.07, as Wall Street moved lower in early trading after disappointing US pending home sales. The prospect of further sanctions against Russia over the situation in Ukraine also dampened sentiment. Later in the week come eurozone confidence figures and US GDP data, as well as the monthly US non-farm payroll numbers.

BSkyB was 30p better at 904.5p after analysts at Nomura raised their rating on the satellite broadcaster from reduce to neutral with a target price raised from 870p to 900p. An upbeat trading statement from Ryanair helped rival easyJet climb 12p to £13.44.

But Aberdeen Asset Management dropped 24.4p to 435p as it reported a fall in funds under management after a series of client withdrawals.

Among the banks, Lloyds Banking Group showed little reaction to the £226m fines levied for rigging libor rates and manipulating the fees it paid the Bank of England for emergency funding during the financial crisis. Lloyds edged up 0.03p to 74.84p.

Meanwhile Royal Bank of Scotland gave up some of the gains made on Friday when it released better than expected results, ahead of schedule. It closed 12.2p lower at 352p.

Among the mid-caps Ophir Energy rose 8.4p to 207.1p as traders said the current share price undervalued the company's assets.

Petra Diamonds was in sparkling form, up 5.6p to 216.6p after full revenues reached a record £278m, up 17%, on record production of 3.1m carats, also up 17%. Numis said:

Overall another solid result. The growth programme remains on track and the diamond market firm. We adjust our forecasts ahead of new guidance next month, expecting higher prices, offset by lower forecast production and higher costs over the next few years. We increase our target price to 240p, from 220p, but downgrade to an add recommendation [from buy] on price appreciation. We continue to like the stock and see it as a good investment in the diamond space.

Home Retail was 4.5p weaker at 165.7p. Weekend reports suggested the company was considering spinning off its DIY business Homebase from the Argos operations. Traders believe such a move is unlikely in the immediate future, but analyst Freddie George at Cantor Fitzgerald said a disposal of Homebase would be viewed positively by the market:

There is, in our view, now limited overlap with the core Argos business which as part of its new strategy is looking to transform from being a catalogue to digital retailer. Although the disposal of Homebase is likely to be dilutary to earnings, any transaction is likely to highlight the attractions of the core business, Argos, as a potential private equity bid.
We are, however, retaining our hold recommendation and reducing our target price to 185p from 215p. Hence, we still need to be convinced that the new Argos strategy is working and that the encouraging results from the new Argos format initiative are maintained.

Lower down the market, ULS Technology, which provides an online comparison site for finding the best deal for residential conveyancing solicitors, made a bright start to life on Aim. The company raised £12 from institutional investors at 40p a share, valuing the business at more than £25m. It closed at 43.5p.

Finally electronics manufacture Stadium added 7p to 73p after the £8m cash and share purchase of US group United Wireless. House broker N+1 Singer said the deal would add £1m to pre-tax profits with their 2015 forecasts raised to £4.2m from £3.2m.