Tobaccos fail to puff up FTSE 100 as stimulus woes weigh

Thu Aug 15, 2013 4:16am EDT

* FTSE 100 down 30.90 points at 6,556.53

* AstraZeneca, Glaxo knocked by MS downgrade

* Imperial Tobacco enjoy post results relief rally

By David Brett

LONDON, Aug 15 (Reuters) - Britain's top share index opened lower on Thursday as the FTSE 100 awaited further evidence on the economic recovery and stimulus policies with cyclical stocks and drugmakers among the top fallers.

Volumes were expected to be thin with the Assumption Day holiday in most of continental Europe.

London's blue chip index was down 30.90 points, or 0.5 percent at 6,556.53, tracking overnight weakness in the U.S. and Asia, as worries over the timing and extent to which the U.S. Federal Reserve will withdraw its economic stimulus continued to hinder the market's progress.

One trader said a combination of thin summer volumes, mixed Q2 earnings reports, uncertainty around the future of loose global monetary policy and desire for more convincing growth data was keeping index moves limited. He anticipated a holding pattern until things hot up in September with German elections and potential stimulus tapering by the Federal reserve.

Energy stocks, miners and financials, those most acutely exposed to the fortunes of the broader economy, all fell early on Thursday.

Steve Ruffley, chief market strategist at spreadbetting and CFD platform InterTrader said with little economic data for the market to chew on, investors were waiting for a technical push higher rather than a fundamental bias.

He said technically there was support for the FTSE 100 around the 20-day moving average at 6,565 and below that 6,534.7.

Heavyweight drugmakers GlaxoSmithKline (GSK) and AstraZeneca (AZN) were among the biggest early fallers, down 1.4 percent and 0.7 percent, respectively after Morgan Stanley cut its rating on both companies citing valuation grounds.

"We retain conviction in our overweight (European drugmakers), but move AZN & GSK to underweight (from equalweight) as risk-reward skews now look less favourable," Morgan Stanley says in a note.

Tobacco stocks were the main gainers after Imperial Tobacco Group (IMT) reported results with traders expressing relief the update was not accompanied by a profit warning, although they said an analyst meeting at 0900 GMT would be key for direction.

"Expectations were low going into numbers with a few expecting the company to cut guidance," Simon Maughan, analyst at Olivetree Financial Group said.

IMT rose 2 percent although the stock has fallen around 9 percent so far in 2013, compared with an 11 percent gain on the FTSE 100.

"The stock is very cheap, but has been for sometime. It is a stale bull for many, so expectations are for the stock to bounce first thing," he said. (Reporting by David Brett; Editing by Toby Chopra)

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