Tobacco stocks stubbed out by clampdown in US
Major UK tobacco stocks sank after US regulators indicated that they might impose strict limits on nicotine levels in cigarettes.
Lynn Hull, a pharmacologist who works within the US Food and Drug administration (FDa), said in a webcast that reducing the amount of nicotine in cigarettes by as much as 96pc would improve public health.
Imperial Brands, the company behind Lambert & Butler, dipped 6pc, or 161.5p, to 2516.5p. British
American Tobacco, the Lucky Strike manufacturer, slid 3.9pc, or 133p, to 3272p.
Hull said: ‘Making all cigarettes minimally addictive could significantly reduce the morbidity and mortality caused by smoking.’
Her talk began with a disclaimer saying she did not represent the FDa’s position, but it still sparked speculation new regulation could be on the horizon. Earlier this year, the FDa said it was planning a proposal on nicotine reduction.
according to one paper which Hull mentioned, if limits were enforced in 2020 then 33m people would be prevented from smoking, and 8m from dying, by 2100.
owen Bennett, an analyst at jefferies, has said that cutting levels so drastically would require expensive genetic modification of tobacco plants. But firms such as Imperial Brands and British american Tobacco have already been increasing their focus on alternatives, such as vaping, although these have recently come under scrutiny for encouraging addiction in teenagers.
Pest control firm Rentokil Initial was also weighed down by regulatory scrutiny, this time from the UK’s Competition and Markets authority (CMa), which said it was looking into whether the £40m acquisition of Mitie’s pest control division, announced this month, would limit competition and push up prices in the sector.
Until the authority completes its investigation, rentokil will not be allowed to take any action to merge the Mitie unit in with its own business. rentokil’s shares fell 1.4pc, or 4.4p, to 300.1p.
It was a busy day for the CMa, which also announced it was looking into aircraft leasing arrangements between aer Lingus, owned by International Consolidated airlines, and Cityjet.
Cityjet entered into an agreement with aer Lingus in august to lease a number of its planes, along with their crew, to its Irish competitor. But the CMa has flagged that this may substantially reduce competition. Hungarian budget airline Wizz
Air benefited from the troubles among its competitors, soaring 5.5pc, or 129p, to 2458p.
analysts at Berenberg have issued the airline with a ‘buy’ recommendation, saying fear over a potential profit warning – as seen at competitor ryanair – had pushed the shares down. The current share price would now allow for a ‘sizeable cut’ to earnings guidance, analysts added.
after a dramatic sell-off earlier this week, the FTSE 100 picked up by 0.16pc, or 11.02 points, to 6995.91 as investors put aside fears over trade protectionism and fast-rising US interest rates. In the US, the Dow Jones Industrial Average was up 1.15pc, or 287.16 points, at 25,339.99.
Back in the UK, plastics specialist Carclo gave investors mixed messages as it said it had underperformed in the first half of the year due to problems in its technical plastics division.
Three new medical programmes were delayed by customers, it said, but these should be carried into the second half of the year.
Meanwhile its aerospace business had performed slightly ahead of expectations, meaning full-year results should be on track. Shares slipped by 5.4pc, or 4.6p, to 81.4p.