Tobacco stocks shore up FTSE surge

Tobacco stocks provided the spark for the FTSE Index 100 Index to press back towards the 4500 barrier today.

Tobacco stocks provided the spark for the FTSE Index 100 Index to press back towards the 4500 barrier today.

News of a breakthrough in British American Tobacco’s US merger plans drove the stock to the top of the risers board and helped the Footsie close 18.2 points higher at 4486.7.

The London market was buoyant early in the session but lost some of its steam after it emerged that the Bank of England’s monetary policy committee voted unanimously to raise interest rates by a quarter-point earlier this month.

Analysts believe the cost of borrowing is likely to rise again in August, although a third consecutive hike next month has not been ruled out.

A busy day for corporate news in London saw gains in the media and retail sectors but Vodafone’s recent bumpy run continued as it tested a new seven month low.

Shares in the mobile phone group, which had been as high as 149.5p earlier this year, closed off a penny at 121.75p.

Investors have shunned the stock amid fears of competitive pricing and it was announced today that two senior executives are to leave the group, including the highly respected boss of the company’s Southern European region.

By contrast, BAT surged to a 7% gain after the Federal Trade Commission cleared the acquisition of its US-based Brown & Jackson subsidiary by RJ Reynolds. Shares were 59.5p higher at 883p.

The news boosted rivals Imperial Tobacco and Gallaher, which were 14p and 11p stronger at 1233p and 698p respectively,

ITV was second in the list of the Footsie risers board – up 3p at 113p – after it announced strong revenues figures for the first half of the year and said it would significantly increase investment in digital services, such as ITV2.

Electrical retailer Dixons was also upbeat about prospects as an 11% rise in profits helped shares spark 3.5p to 162.75p.

Among other developments in the top flight, 3i perked 16p to 616p as investors appeared relieved at the failure of the investment group’s consortium to win the £665 million auction for the Telegraph newspaper titles.

Outside the top flight, transport group Stagecoach rose 0.25p to 87.25p after confirming a share buyback and announcing that annual profits had risen by 6.2%.

Elsewhere, retailer WH Smith tumbled 11p to 310p following news that takeover talks with venture capital group Permira had been suspended.

And ports and ferries group P&O slipped 1% or 3.5p to 211.5p as it showed little sign of a trading recovery in its cross-Channel market.

Shares in RAC were unchanged at 705p after the motoring services group said trading was continuing to accelerate with a strong performance from its breakdown service.

The biggest risers in the Footsie today were BAT up 59.5p to 883p, ITV ahead 3p to 113p, SABmiller up 18.5p to 704.5p and 3i Group ahead 16p to 616p.

The heaviest fallers were Man Group off 53p to 1496p, Capita Group falling 8.75p to 316.25p, Rentokil Initial off 3.5p to 144.75p and Land Securities falling 21p to 1161p.

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