FTSE slips as US nicotine ban weighs on tobacco stocks

The FTSE 100 fell below 7,000 levels this morning as tobacco giants tumbled on the news the US ponders plans to lower nicotine levels in cigarettes.

The main market fell 30 points, or 0.43%, to 6,969, despite the unemployment rate falling to 4.9% in the three months to February, better than analysts’ forecast 5%. The number of applicants was 10,500 versus the expected 24,500 and a huge improvement from the 86,600 in the previous month.

Connor Campbell, an analyst at Spreadex, said the job data looked positive on the surface, but it wasn’t the full story as the vacation schedule masked the real picture.

“Knowing that vacation is the last line of defense against a potential workplace disaster seems to have undermined confidence in this morning’s numbers,” he said.

Instead, the markets focused on news from the US that the Joe Biden administration is considering limiting the amount of nicotine in cigarettes to levels that will no longer be addictive.

British tobacco stocks followed US giants Philip Morris and Altria this morning British-American tobacco ((Bats) hit the bottom of the blue chips and lose 5.5% or 162p to trade at £ 27.52 while his peer Imperial brands ((IN THE B) declined 5.4%, or 85p, to £ 14.95.

Neil Wilson, an analyst at Markets.com, said a similar 2017 report brought tobacco stocks to their knees, but asked whether a nicotine cap “really makes as much of a difference as price action suggests” .

Although fewer people would be addicted to cigarettes, he said, “consumers might tend to consider lower-nicotine cigarettes to be safe, which could make it easier to sell, which is exactly the opposite of what the administration intends”.

Despite everything, the FTSE 250 fell by 60 points or 0.27% to 22,430 Elementis ((ELM) rose 18.6%, or 25p, to 161p after Innospec, listed on Nasdaq, took a £ 1 billion takeover of the specialty chemicals company.

Jefferies analyst Jaroslaw Pominkiewicz said the unconfirmed offer of 200p per share represents a 47% premium over yesterday’s closing price.

“The approach underscores the fact that Elementis stock was cheap,” he said.

Odyssean ((OIT), the UK small company’s investment trust with over 10% of its assets in Elementis late last month, fired 0.5%, or 0.7 pence, to 143.7 pence.

Hammerson ((HMSO) fell to the mid-cap floor, down 2.2% to trade at 37p. The mall owner, which has Birmingham Bullring and London’s Brent Cross in its portfolio, said it only got 40% rent in the second quarter despite the loosening of lockdown restrictions.

The number of collections has been reduced by the persistent strict restrictions in France and Ireland, which have had a dramatic impact on visitor numbers.

Aquila European Renewables Income ((AERS) rose 1.6% year-over-year to 92p, a modest total return of 0.7% on net assets that underpinned a 2% return for shareholders last year. The dividend rose from 1.5p in 2019 to 4p per share, which is 1.1 times earnings.

AVI Japan opportunities ((AJOT) fell 1.2% to 111 pence on a quarterly update that saw the activist’s net asset value (NAV) for smaller businesses fell 0.6%, with a strong pound dropping 7.5% of underlying yen yields.

GCP Asset-Backed Income ((GABI) declined 0.7p to 98.5p after exposure to high risk loans remained at 8.8% but said it received all repayments on its loans in the first quarter. Net asset value, including dividends, increased 0.3p to 102.49p as of March 31.

FTSE slips as US nicotine ban weighs on tobacco stocks

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