LONDON MARKET CLOSE: Tobacco Stocks End Up On US E-Cigarette Crackdown

LONDON (Alliance News) - Stocks in London ended higher on Wednesday as gains from heavyweight ...

Alliance News 12 September, 2018 | 5:20PM
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LONDON (Alliance News) - Stocks in London ended higher on Wednesday as gains from heavyweight tobacco stocks countered declines from the energy sector in the FTSE 100.

The FTSE 100 closed up 0.3%, or 39.82 points, at 7,313.36. The FTSE 250 ended up 0.8%, or 154.11 points, at 20,380.53, and the AIM All-Share closed up 0.1%, or 0.74 points, at 1,096.92.

The Cboe UK 100 closed up 0.6% at 12,377.87, the Cboe UK 250 ended up 0.8% at 18,528.46, and the Cboe UK Small Companies ended up 0.4% at 12,179.67.

On the London Stock Exchange, tobacco stocks ended as the best blue chip performers after the head of the US Food & Drug Administration said the agency could ban all flavoured e-cigarettes due to their popularity among teenagers, CNBC reported.

Shares in Dunhill cigarette maker British American Tobacco closed up 5.9%, while Embassy and Rizla owner Imperial Brands ended up 3.2%.

The FDA is considering restricting e-cigarette manufacturers from selling flavoured nicotine liquid or making the products undergo an agency review, according to CNBC.

"On a day where the FDA warned that flavoured e-cigarettes could be banned due to the epidemic in teen use, this is a rare case where a regulatory clampdown positively effects the firm being targeted. We also saw BAT request the FDA reviews their 'heat-not-burn' products that would likely prove another revenue source, appealing particularly to previous smokers," said IG market analyst Joshua Mahony.

"With Phillip Morris previously seeking to sue BAT over their 'Glo' tobacco heating products, this approach to the FDA helps raise hopes that the firm will be able to leave those fears behind," Mahony added.

Shares in Marlboro cigarette maker Philip Morris International were up 4.4% in New York.

Oil majors ended in the green tracking spot oil prices higher, with Royal Dutch Shell 'A' up 1.0% Shell 'B' up 1.0% and BP up 1.6%.

Brent oil was higher quoted at USD a barrel at the London equities close from USD78.65 at the close Tuesday, as Hurricane Florence in the US continues to be a dangerous Category 4 storm as it heads toward the East Coast with an expected landfall early Friday.

Additionally, the latest Energy Information Administration report showed a 5.29 million barrel decline in US stockpiles

The North Sea benchmark was extending gains from the previous session amid looming Iranian sanctions, as the US puts pressure on other countries to cut oil imports from the Persian Gulf nation - which is one of the world's largest oil exporters.

"Many countries which are known to purchase approximately 2 million barrels per day of Iranian oil are having to relocate to different suppliers. However, with Iran being out of the picture Saudi Arabia and Russia may have to cover for these losses. Keeping in mind, Russia has warned the impact of sanctions on Iran. This brings about uncertainty in the markets for oil," noted ThinkMarkets analyst Naeem Aslam.

At the other end of the large cap index, SSE ended as the worst performer, down 8.2% after the 'Big Six' energy supplier warned that its profit for the first six months of the year would be half compared with last year.

The company said that "dry, still and warm weather" in the first five months of its financial year, in addition to "consistently" high gas prices, has hit adjusted operating profit to the tune of GBP190 million.

Fellow energy stocks Centrica and National Grid closed down 3.6% and 0.8%, respectively.

The pound was higher quoted at USD1.3028 at the London equities close, compared to USD1.2995 at the close Tuesday, ahead of the Bank of England's interest rate decision on Thursday.

The central bank will announce its latest monetary policy decision, alongside the release of the Monetary Policy Committee meeting minutes, at midday. There will be no press conference with Governor Mark Carney following the decision, nor updated economic forecasts.

BoE policymakers are set to sit tight on interest rate after a unanimous rate hike decision in August.

The nine-member Monetary Policy Committee, led by Carney, is widely expected to keep the key rate unchanged at 0.75%.

September's meeting will see new member Jonathan Haskel join the rate-setting committee, and comes just days after confirmation that Carney will remain in charge of the BoE until 2020 to help navigate the UK through exiting the European Union.

In a positive development, European Commission President Jean-Claude Juncker said Brussels will work "day and night" to reach a Brexit deal.

In his annual state of the union address to the European Parliament in Strasbourg, Juncker said they owe it to EU citizens to preserve stability in the wake of the UK's withdrawal.

At the same time, he warned the other 27 member states remain united behind the commission's negotiating position and that the UK cannot enjoy the same "privileged position" as a member state.

"If you leave the union you are of course no longer part of our single market - and certainly not only in parts of it," he said.

Juncker welcomed Prime Minister Theresa May's proposal in the Chequers plan for the establishment of a free trade area between Britain and the EU.

In domestic political news, prominent Conservative Party Brexiteers have dismissed claims of a plot to oust May over her controversial Chequers blueprint for leaving the EU.

Around 50 Conservative MPs are understood to have attended a meeting on Tuesday of the pro-Brexit European Research Group where a possible leadership challenge was said to have been discussed.

At the launch on Wednesday of the ERG's plan to avoid the return of a hard border in Northern Ireland, leading figures in the group were at pains to stress they were not questioning May's position.

ERG chairman Jacob Rees-Mogg insisted he was seeking a change of Government policy, not a change in leadership.

"I have long said, and repeated again and again, that the policy needs to be changed but I am supporting the person," he said.

Rees-Mogg's comments were echoed by former Brexit secretary David Davis, who quit over the Chequers plan which would see the UK maintain a "common rule book" with the EU for trade in goods and agriculture.

"I disagree with her on one issue - this issue. She should stay in place because we need stability and we need decent government as the backdrop to what we are doing in the coming six months," Davis said.

In Paris the CAC 40 finished up 0.9%, while the DAX 30 in Frankfurt ended up 0.5%.

The euro was up at USD1.1625 at the European equities close, against USD1.1585 late Tuesday, ahead of the European Central Bank's interest rate decision on Thursday.

The ECB Governing Council convenes in Frankfurt announcing its policy decision at 1245 BST. This will be followed by a press conference with ECB President Mario Draghi at 1330 BST.

Stocks in New York were mixed at the London equities close. The DJIA was up 0.5%, the S&P 500 index up 0.1% and the Nasdaq Composite %.

On the US economic front, the Labor Department released a report unexpectedly showing a modest drop in producer prices in the month of August.

The Labor Department said its producer price index for final demand edged down by 0.1% in August after coming in unchanged in July. Economists had expected prices to rise by 0.2%.

Gold quoted higher at USD1,202.20 an ounce at the London equities close against USD1,193.30 late Tuesday.

The economic events calendar on Thursday has China M2 money supply numbers at 0230 BST, Germany inflation readings at 0700 BST and US inflation data at 1330 BST.

The UK corporate calendar on Thursday has full year results from engineering consultant Ricardo and half year results from supermarket chain WM Morrison Supermarkets and online betting group GVC Holdings. There is also a trading statement from waste management company Biffa.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2018 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article
Security Name Price Change (%) Morningstar
Rating
BP PLC 570.90 GBX 0.69
Centrica PLC 147.35 GBX -1.90
SSE PLC 1,133.00 GBX 0.35
British American Tobacco PLC 3,534.00 GBX -2.29
Imperial Brands PLC 2,609.00 GBX -1.84
Royal Dutch Shell PLC B 2,640.32 GBX 0.95
Royal Dutch Shell PLC Class A 28.98 EUR 1.52 -
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