Sector movers: Tobacco and tech fizzle, miners and insurers rise

Tobacco and tech stocks led on the downside on Tuesday, while the mining and non-life insurance sectors were the big risers.

Tobacco companies have been buffeted by various issues in recent weeks, with Morgan Stanley restarting coverage of London-listed giants British American Tobacco and Imperial Brands on Tuesday at reinstated at ‘equalweight’ and ‘underweight’ respectively.

There are three "lingering clouds casting a long shadow": new regulation, self-disruption and new entrants, as well as the further pressure from interest rate rises, such as have been coming regularly from the US central bank, which tend to drive tobacco underperformance, with the effect on emerging markets particularly important with tobacco's high proportion of revenues exposed to EM currencies - 40% in the case of BATS.

Analysts don’t think this has been priced in, nor that the risk of nicotine being cut by the US Food & Drug Administration to non-addictive levels would be "a real game changer, not just an unlikely outer year risk", as the market seems to view it.

With the options for consuming nicotine changing fast, "directly disrupting the cash compounding nature of the tobacco industry for investors, companies and governments alike", Morgan Stanley said this has materially changed the potential range and volatility of outcomes for the sector, "leading us to tread cautiously despite the material stock pullbacks" in what analysts see as the industry's most significant period of disruption for two decades.

UK tech stocks were down, mirroring the Nasdaq's biggest fall in weeks, as trade tariffs levied by the White House produced a reaction from China that traders warned could hit tech manufacturers.

The Chinese commerce ministry has already announced it has been left with no choice but to retaliate to President Trump's 10% tariffs on $200bn of goods, with officials in Beijing mulling potential "export restraints" on US supply chains.

This could see China restrict export of goods, raw materials and components core to US manufacturing supply chains, former finance minister Lou Jiwei said, according to a Reuters report.

Miners were on the up in what was a "rare day of not being hit by trade war gloom", said Russ Mould at broker AJ Bell, as the sector was lifted by talk that Beijing will increase infrastructure investment.

Non-life insurers were carried higher by rising US Treasury yields, while insurance broker Jardine Lloyd Thompson agreed to be bought by US professional services giant Marsh & McLennan for around £4.3bn.

Top performing sectors so far today

Industrial Metals & Mining 4,553.02 +2.81%
Insurance (non-life) 3,277.80 +2.75%
Oil Equipment, Services & Distribution 15,390.42 +2.59%
Mining 16,397.69 +1.32%
Technology Hardware & Equipment 998.52 +1.28%

Bottom performing sectors so far today

Tobacco 40,340.02 -1.51%
Software & Computer Services 1,775.71 -1.16%
Forestry & Paper 23,719.55 -0.99%
Health Care Equipment & Services 7,651.23 -0.93%
Media 7,900.11 -0.82%

Market Movers

FTSE 100 (UKX) 7,297.36 -0.06%
FTSE 250 (MCX) 20,442.58 0.33%
techMARK (TASX) 3,466.55 -0.16%