AstraZeneca had been fizzing lately amid hopes of a bid from a bigger rival – GlaxoSmithKline, perhaps – and ever since Merck agreed to swallow Schering-Plough, its American rival. But the bubbles died away yesterday as AstraZeneca’s shares, having risen 14 per cent since the Merck deal was agreed last week, retreated, falling 29p to £24.24.

Credit Suisse was to blame, injecting a note of cautionby initiating coverage of the Anglo-Swedish drug group with an “underperform” rating and an £18.90 price target. Luisa Hector, the analyst, said that although investors understood that AstraZeneca would suffer a 30 per cent cut in revenue by 2014 from the expiry of patents on its top-selling Seroquell antidepression drug and its Arimidex breast cancer treatment, they did not realise how big an impact this would have on profitability in four years’ time.

Ms Hector said that AstraZeneca’s drugs still in development had not shown great efficacy and she predicted no meaningful earnings from them before 2013. This meant that cashflow would be squeezed for the next few years, restricting dividend payouts, the key driver of so-called “safe haven” stocks in a recession.

The FTSE 100 closed down 6.89 points at 3,857.10 after a sell-off of mining stocks, which were hit by Alcoa, the world’s largest aluminium producer, cutting its dividend and declaring a rescue equity fundraising and by a profit warning from Nucor, an American steelmaker. Rio Tinto, which bought Alcan, the rival aluminium producer, at the peak of the market, fell 119p to £19.82. Rio may also have disappointed some investors by appointing Jan du Plessis, an insider, as its new chairman rather than seeking a fresh face. Eurasian Natural Resources, a supplier of iron ore to steel mills, fell 38½p to 375p. Anglo Americanslid 37p to £11.16 and BHP Billiton dropped 38p to £13.09.

HSBC jumped 18p to 460p after disclosing, with its rights-issue prospectus, that January trading had been ahead of its expectations and that February had been in line with expectations, echoing recent remarks by Barclays, up 0.4p at 91.3p, Citigroup and Bank of America.

TUI Travel rose 8½p to 243¼p after saying that it was in talks to hive off its underperforming TUIfly airline in a merger with Air Berlin.

Compass, the world’s largest caterer, fell 11¼p to 305¼p after Deutsche Bank cut it from “hold” to “sell”, advising clients to take profits following a recent rally. Although most of the caterer’s contracts are long-term deals with publicly funded bodies, Deutsche said that the company is more exposed to a global recession than people think. It cut its target price from 335p to 245p.

Vodafone rose 3.6p to 124.1p amid reports from Spain that it may enter a network-sharing deal with Telefónica in Britain, Spain, Germany, Ireland and the Czech Republic.

In Saturday’s market report, we incorrectly stated that Miriam Hehir, the RBC Capital Markets analyst, had upgraded her rating of Glencore debt from “sector perform” to “out-perform”. In fact, she cut it from “out-perform” to “sector perform”.

New York: Shares jumped as a surge in February housing starts gave investors a rare piece of good economic news. The Dow Jones industrial average closed up 178.73 points at 7,395.70.

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