FTSE 100 drops as AstraZeneca declines more than 6%

AstraZeneca shares closed at their lowest level since October 2022 after a step-up in R&D and price cuts for some medicines in emerging markets led its Q4 profit to disappoint analyst expectations

Early gains in the UK's blue-chip stock index fizzled out on Thursday after drugmaker AstraZeneca dropped more than 6% following disappointing earnings and outweighed a jump in the shares of British American Tobacco and Unilever.

AstraZeneca shares closed at their lowest level since October 2022 after a step-up in R&D and price cuts for some medicines in emerging markets led its Q4 profit to disappoint analyst expectations.

The company issued strong guidance for growth in 2024 and its revenue numbers were solid, but there were some red flags for investors, including rising costs and softer-than-expected margins, according to Mark Crouch, analyst at investment platform eToro.

Astra's poor performance since the summer has been a key driver for the FTSE 100's inability to keep up with its peers, and today's numbers indicate that weight will continue for the time being, he added.

The blue-chip FTSE 100 slid 0.4%, reversing early gains of 0.3%.

Limiting losses in the index, British American Tobacco gained 7.1% after it said it was "actively working" to sell some of its shareholding in India's ITC, allowing it to pay down debt and move faster towards the leverage range at which it could resume buybacks.

Unilever added 3.2% after the soap-maker reported an increase in fourth-quarter sales and launched a €1.5 billion ($1.6 billion) share buyback programme.

The midcap FTSE 250 ended flat, having shed all of its morning gains as shares of PZ Cussons Plc came under pressure for a second day after its profit warning.

DS Smith climbed 9.8% after packaging firm Mondi said it was in the early stages of considering a possible all-share bid for its smaller rival. Mondi slipped 3.3%.

On the macro front, BoE rate-setter Catherine Mann said supply chain disruption from hostilities in the Red Sea could quickly feed into companies' pricing decisions, exacerbating Britain's inflation problem.