* Healthcare stocks drag on the benchmark index
* Powell-fuelled rally fades out
* Bank-heavy Milan and Marid stocks outperform
(Recasts, updates to close, changes quote)
By Agamoni Ghosh
July 11 (Reuters) - European shares closed at a two-week low on Thursday weighed down by pharma stocks on worries that U.S. government may intervene on high drug prices, while optimism from the Federal Reserve's dovish stance faded away.
The pan-European stocks benchmark .STOXX rallied earlier in the day on remarks from Fed Chair Jerome Powell but reversed course in late afternoon trading to close 0.1% lower.
The White House announced that it was ditching its push for changes to the pharma rebate structure, providing some relief to health insurance companies but hurting drugmakers, including those in Europe. Nordisk NOVOb.CO , UCB UCB.BR , Astrazeneca AZN.L and Roche ROG.S all ended nearly 2% lower, dragging the pharma index .SXDP down 0.7%, the biggest weight on the benchmark.
"Most drugmakers supported the initiative to eliminate rebates but now we see no solution to the challenges manufacturers face regarding growing rebates, " Morgan Stanley (NYSE: MS ) said in a note.
"The lack of progress in Washington suggests that the industry will face ongoing political pressure, including legislative risk."
Also pressuring the sector was German medical imaging equipment maker Siemens Healthineers SHLG.DE which slid 6% on worries about the performance of its Diagnostics business.
Bank of America Merrill Lynch (NYSE: BAC ) warned in a note that depressed production for the sector across regions is unlikely to pick up materially in the near-term.
Also weighing on sentiment was the International Monetary Fund's warning that the euro zone may see prolonged anemic growth, backing the European Central Bank's (ECB) plans for fresh stimulus.
Bucking the broader pharma trend, German drugmaker Gerresheimer AG GXIG.DE rose 13% to the top of the STOXX 600 after confirming revenue guidance for the year and posting strong second quarter results. the recent bout of losses, the STOXX 600 has recouped its May losses, gaining around 6% since then, mostly on expectations that major central banks will adopt a looser monetary policy.
Add Chart to Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
- Enrich the conversation
- Stay focused and on track. Only post material that’s relevant to the topic being discussed.
- Be respectful. Even negative opinions can be framed positively and diplomatically.
- Use standard writing style. Include punctuation and upper and lower cases.
- NOTE: Spam and/or promotional messages and links within a comment will be removed
- Avoid profanity, slander or personal attacks directed at an author or another user.
- Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
- Only English comments will be allowed.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.