Shares run out of puff on talk of Biden nicotine cap
MOMENTUM behind London’s big tobacco stocks was stubbed out today amid reports that US president Joe Biden is considering tough new curbs on the industry.
As well as reducing the amount of nicotine in cigarettes to levels no longer addictive, the Wall Street Journal said Biden was mulling a possible menthol ban.
The speculation sent shares in US-listed Altria down 6% last night before Imperial Brands and British American Tobacco tumbled more than 5% in the FTSE 100 index.
Both London-listed stocks, which are favoured by investors for their income-paying potential, appear to have weathered changes to smoking habits caused by the pandemic after their respective share prices rose by 17% since early March.
Markets.com analyst Neil Wilson questioned whether the curbs being considered by the White House would make as big a difference as the share price moves suggest.
He said: “Consumers may be tended to perceive lower nicotine cigarettes as safer, which could make them easier to sell, the precise opposite of what the administration intends.”
The reversal for shares in the tobacco giants contributed to the FTSE 100 index drifting below the 7,000 threshold, with other fallers including Rolls-Royce and British Airways owner IAG.
Analysts at IG said today’s weakness reflected the lack of further impetus from high profile earnings and the strength in sterling against the dollar over the past few sessions.
The FTSE 100 index stood 37.67 points lower at 6,962.53, with cyber security firm Avast the stand-out performer after it reported a 10% jump in revenues for the first quarter. Shares rose 13p to 484.6p as CEO Ondrej Vlcek said the firm, whose software protects more than 435 million devices, was looking forward with confidence.