Market report: Monday close

SHARES of Anglo-Swedish drugs giant

City brokers have begun slashing their forecasts for the company amid speculation the US Food and Drug Administration (FDA) will force it to withdraw Iressa.

Credit Suisse First Boston has moved from neutral to underperform and cut its 12-month target from 2500p to 1950p, saying the move has put increased pressure on AZ's new-drugs pipeline.

UBS has downgraded from buy to neutral with its target slashed from 2740p to 2100p. It values the shares at a 15% discount to the rest of the European drugs sector.

JP Morgan has moved from overweight to neutral and assumes Iressa will now be withdrawn, cutting its target from 2470p to 2100p. Lehman Brothers has repeated its equalweight advice but reduced its forecast from 2250p to 2160p, while Williams de Broë is dusting off its weak hold stance.

AZ tested more than 200,000 cancer sufferers and while Iressa shrank tumours, it did not prolong life. Earlier this year, the FDA refused to allow its anti-coagulant Exanta to be marketed in the US. There is also a question mark over the group's fat-busting treatment Crestor. But AZ is not the only drug company suffering.

Merck has had to withdraw one of its painkillers in the States because of side-effects. Viagra manufacturer Pfizer has also had problems to contend with. Glaxo-SmithKline's shares, up 12p at 1182p, are still 50% below their peak of four years ago.

Stephen Ford at broker Brewin Dolphin says drug companies are seen increasingly as highrisk/low-growth, a lethal combination for investors.

After Friday's 200p fall, AZ rallied 24p to 1910p supported by its associate Cambridge Antibody Technology, which has won its High Court case for increased royalties against Abbot Laboratories.

CAT shares returned from a brief suspension 93p higher at 725p and stands to make an extra £30m a year. Dealers say the shares are now worth between 900p and 1000p. AZ invested £75m in CAT, taking a 19% stake, earlier this year.

AIM-listed Alltracel Pharmaceuticals was suspended at 23½p ahead of a reverse takeover by Wetstone Products for up to £8m.

Share prices generally were squeezed higher in thin trade with the FTSE 100 index rising 41.8 to 4738.6. In early moves this afternoon, Wall Street reversed Friday's losses.

Back here, news agency and financial information systems supplier Reuters , ½p down at 366½p. CSFB is saying buy the shares ahead of a trading update in the New Year. Cairn Energy extended Friday's 25% tumble with a loss of 45p to 1070p. UBS has repeated its buy rating but slashed its target from 1800p to 1390p.

Former high-flying internet security provider Baltimore slipped 0.38p to 9.13p despite earthport confirming it is considering a bid for the company.

Baltimore's extraordinary general meeting today approved a plan to consolidate the shares and seek a de-listing.

Manchester United climbed 11½p to 277½p as US financier Malcolm Glazer lined up a new offer worth £800m. It was the first day of trading on AIM for Physiomics following a placing by broker Hoodless Brennan at 2p. The shares opened at 2.31p.