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Calculated risk

Investors are opting to plough their money into higher risk stocks in the hope of seeing short term gains

Investors are opting to plough their money into higher risk stocks in the hope of seeing short term gains.

The UK manufacturing sector saw the most devastating fall in activity since 1989 during the first quarter of the year according to a British Chamber of Commerce survey. Some 55 per cent more manufacturers reported falls in domestic sales rather than increases, with jobs being cut at a record pace, driving unemployment to a forecast 3.2 million. Within manufacturing, domestic sales, investment and confidence have all fallen to their lowest ever levels. The pace of decline at service firms also fell away sharply. This recession/ depression is following a similar pattern to those of the 1980s and 1990s when manufacturers were hit hardest.

The good news is that oil has fallen in price to under $50 a barrel on International Energy Agency predictions that world oil demand will fall by 2.4m barrels per day this year.

On the UK stock market investors have lost income from shares in tandem with the fall in share prices. Data services company Markit points out that dividend yields on the FTSE 100 stocks have fallen from 6.12 per cent to 5.85 per cent in the past year despite a 31 per cent fall in the blue chip index. The stock market is now swinging wildly at just below 4,000.

The pharmaceutical sector has been hit by the recovery in the equity market as investors have been deserting safe, defensive sectors – among which pharmaceutical shares lead due to their high dividend yields and strong cash piles – for riskier companies offering more upside potential along with short term capital gains if the market continues to recover.

Possible new treatments for skin cancer
A gene has been discovered which triggers the most deadly type of skin cancer and the discovery should open up new treatments for the disease. Up to 70 per cent of malignant melanoma can result from ageing and over-exposure to the sun. Scientists at The Institute of Cancer Research had previously linked the rogue version of the BRAF gene to the disease but didn't realise it caused the cancer. The researchers have now shown that acquiring the BRAF mutation can be the first event in the cascade of genetic changes that can lead to melanoma, the most deadly form of skin cancer.

Professor Richard Marais, from the Institute said that scientists know that excessive sun exposure is the main cause of skin cancer, but not much is known about the genetics behind it. "Our study shows that the genetic damage of BRAF is the first step in skin cancer development. Understanding this process will help us develop more effective treatments for the disease," said Marais.

New drug for prostate cancer
A new drug could be ready in three years, which could prove a powerful weapon against prostate cancer. Tests have shown that a pill taken once a day shrinks tumours or stops them from growing. The new drug is MDVS3100 and appears to work where other drugs have failed, according to the journal Science. A trial is planned to start later this year in over 3,000 men with prostate cancer that has spread, to determine whether the drug prolongs life. Prostate cancer is the fourth most commonly diagnosed cancer in the UK behind breast, lung and bowel cancer. The risk of prostate cancer increases with age and most sufferers are over 50.

The Author
Malcolm Craig is a freelance financial journalist and author.

16th April 2009

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