GlaxoSmithKline led drugmakers higher while British Airways was the hardest hit in a general sell-off of airline stocks in London. In Europe, shares in Swiss drugmaker Roche jumped.
Vaccines from Roche, which sells Tamiflu, and GSK, maker of Relenza, have been shown to work against viral samples of the new disease. The drugs were also used to help protect against outbreaks of bird flu in Asia, providing windfall profits for the companies.
Worries over swine flu pushed the FTSE 100 index of leading shares down 67 points - or 1.6pc - to 4088.67 in early trading. Shares in Germany and France also fell by between 1.7pc and 1.9pc. Earlier, Asian stock markets had retreated on fears that the global recession would deepen if the swine flu outbreak became a pandemic.
Glaxo and AstraZeneca shares both rose 2pc in the first hour after the market opened in London. British Airways fell 8pc, with cruise company Carnival falling 6.5pc and travel group Thomas Cook sliding 6.4pc.
Roche confirmed it already has a stockpile of 3m packs of Tamiflu ready for use by the World Health Organisation (WHO).
During the panic about Asian bird flu in 2005 and 2006, airline, hotel groups, insurers and oil companies stocks fell heavily, while shares in drug, healthcare and cleaning product businesses soared.
"I think there will be little bit of a lift for pharmaceuticals, but this may not follow through unless the situation gets out of hand," said Paul Kavanagh of stockbroker Killik & Co . "Governments will be looking at vaccines, but it's come at a bad time for the world economy and could be very expensive."
UK companies from HSBC to BT have made Britain among the top ten foreign investors in Mexico in recent years.
On Sunday night, these companies were advising their employees to take precautionary measures, restrict travel to Mexico and monitor Government advice closely. It is understood that several companies, including oil company Shell, have had meetings of contingency planning committees to look at the possibility that the outbreak could worsen.
Other UK companies with offices in Mexico include AstraZeneca, BAT, Diageo, Glaxo Smith Kline, GKN, Shell, BSI and Unilever.
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