MARKET REPORT: Reckitt shares rise after big win in US court

The owner of Dettol and Durex saw its shares rise at the fastest pace in 24 years after a major victory in the US courts.

Reckitt, which also owns Vanish washing powder and Nurofen painkillers, rose 6.6 percent, or 310p, to 4994p after a Missouri judge ruled that the company’s US arm, Mead Johnson, was not responsible for causing the development of necrotizing enterocolitis (NEC) in a boy – a potentially fatal intestinal disease that almost exclusively affects premature babies.

The lawsuit alleged that Mead Johnson, a baby food manufacturer, had failed to warn that its products could cause the disease, with the plaintiffs seeking damages of up to £4.8 billion.

But after a five-week trial period, the jury found that the company, as well as competitor Abbott Laboratories, was not liable. It led to a rally in Reckitt’s share price on Friday. The ruling is a welcome relief for investors in the formula issue. The Missouri case was among about 1,000 similar lawsuits in the US.

They led to fears that the company’s specialized formulas, used to feed newborns in intensive care, could be withdrawn from sale.

Plaintiffs in the cases allege that Mead Johnson concealed the fact that its formulas were riskier than alternatives, such as natural milk from donors. The company denies the allegations. Earlier this year the company suffered a blow when a court ruled in March that it had to pay £46m ($60m) in damages to the mother of a premature baby who died from NEC after being fed Enfamil baby formula .

“There are still plenty of outstanding issues, so this issue won’t go away overnight for Reckitt, but it certainly represents a crumb of comfort for long-suffering shareholders,” AJ Bell investment director Russ Mold said.

It comes amid speculation that Reckitt may want to sell the Mead Johnson business, which it originally bought for £12.8 billion in 2017.

The FTSE 100 rose 0.8 percent, or 67.05 points, to 8177.15 and the FTSE 250 gained 0.5 percent, or 90.78 points, to 20479.74.

After a volatile week in the run-up to the first Labor budget, which took place on Wednesday, traders appeared to have settled in during the final session of the week. The blue chip index was supported by oil companies, with Shell shares up 0.02 per cent, or 0.5p, to 2579p, and BP up 0.4 per cent, or 1.55p, to 378.2p.

Brent crude rose nearly 2.5 percent to around $74.60 a barrel on reports that Iran could be preparing to launch military attacks on Israel within days, further escalating tensions in the oil-rich Middle East.

In the US, shares of tech giant Apple fell almost 2 percent in early trading in New York after results, published on Thursday evening, showed lower sales growth for the Christmas quarter than expected by analysts.

Online retail giant Amazon’s results were better received, with shares rising more than 6 percent after it reported better-than-expected quarterly profits.