Market report: Friday close

THE dollar's fall from grace continues apace. Today, it slumped to a five-year low against sterling and crossed the $1.20 level against the euro for the first time.

It also succeeded in dragging share prices lower in London and a knock-on effect was felt on Wall Street this afternoon as traders returned from yesterday's Thanksgiving celebrations.

Hardest-hit were big dollar-earners such as Financial Times and Penguin publisher Pearson, down 14 1/4p at 648. There were also falls for Rolls-Royce, 1 1/4p to 178 1/4p, Reuters, 5 1/4p to 245 1/2p, advertising giant WPP, 7 1/2p to 557p, and ICI, 3p to 193p. This helped drag the FTSE 100 index 18.5 lower to 4342.6.

Investors may start pulling out of the drugs sector now that the US Medicare Bill, giving the go-ahead for an extra £237bn spending on healthcare, has been passed by Congress. That, at least, is the view of broker Credit Suisse First Boston, which has downgraded the European drug sector from overweight to neutral because it believes investors will now start cashing in profits.

It says funds have been 'warehoused' in the sector while investors await further evidence that the economic revival is under way, which prompts a return to investing in cyclical and technology stocks.

Now that the Medicare Bill has been passed, CSFB expects institutional investors to start pulling out short-term, particularly as interest rates in Europe and the US remain on hold while cyclical companies are in favour.

CSFB has repeated its outperform ratings on UK firms GlaxoSmithKline, down 22p at 1312p, and AstraZeneca, 16p cheaper at 2639p. US securities house Goldman Sachs also rates GSK 'outperform' despite its shares hitting an 18-month high of 1390p earlier this month.

National Grid Transco dipped 6 1/2p to 393p after CSFB repeated its outperform rating and raised its 12-month target from 457p to 467p.

US securities house Morgan Stanley has been focusing its attention on double A-rated companies which it feels still offer value.

Top of its shopping list are oil giant BP, down 2 1/5p at 405 3/4p, insurer Prudential, 7 3/4p lighter at 446 1/4p, and GlaxoSmithKline.

Edinburgh Oil & Gas slipped 1p to 125p on profit-taking following yesterday's 7p rise, which had been fuelled by news that the Government had given the go-ahead for the development of the Buzzard oilfield in the North Sea.

Buzzard is reckoned to contain about 400 million barrels of recoverable oil and EOG has a 5% stake. City speculators say that makes it attractive to potential bidders anxious for some involvement in the project. Broker Oriel Securities stuck a 150p fair-value tag on it last week.

Loss-making Coffee Republic rose 0.28p to 1.4p after hi-fi entrepreneur Julian Richer snapped up a further 10 million shares, stretching his total holding to 71 million shares, or 17.1%. He paid a higher price for his original stake and was diluted by the recent fund-raising.

City speculators reckon he will eventually make a full bid. Rival Caffe Nero, 1 1/5p cheaper at 47 1/5p, bid £10m, or 4 1/2p a share, last year, but later withdrew.

Ofex Holdings, a smaller rival to the London Stock Exchange, jumped 6 1/2p to 30p. Hoodless Brennan has become the fourth marketmaker to start dealing in its unlisted shares. Earlier this month, Winterflood Securities, a specialist in smaller companies, said it would join in trading soon.