Tobacco stocks weigh on UK's FTSE after RJR fine

Mon Jul 21, 2014 4:23am EDT

* FTSE 100 down 0.3 pct
    * Tobacco stocks hit after $23.6 bln fine on RJ Reynolds
Tobacco
    * Tesco up on investor relief that CEO is leaving
    * Ukraine worries keep a lid on equity markets

    By Sudip Kar-Gupta
    LONDON, July 21 (Reuters) - Britain's top equity index fell
on Monday as tobacco stocks were hit by a multi-billion-dollar
fine against U.S. rival RJ Reynolds.
    The blue-chip FTSE 100 index was down 0.3 percent -
or 18.27 points - at 6,731.18 points in early trading.
    The decline was tempered by a rally in supermarket group
Tesco on news of a leadership change.
    A 0.8 percent fall at British American Tobacco and
a 1 percent drop at Imperial Tobacco together took the
most points off the FTSE 100, after a Florida jury imposed
punitive damages of $23.6 billion against RJ Reynolds Tobacco
Company.  
    Central Markets trading analyst Joe Neighbour said that even
though it was unlikely the fine would be paid out in full, it
was nevertheless damaging for the sector.
    "It's bad for sentiment. It's a landmark case and it could
open up the way for further lawsuits down the line," he said. 
    Tesco rose 2.3 percent as investors expressed relief that
its chief executive Philip Clarke would be stepping down, news
that outweighed the impact of a profit warning..
    "There's some relief that Clarke is leaving, allowing the
company to have a fresh start," said Spreadex sales trader Lee
Mumford.
    Tesco's warning hit the shares of rival supermarkets
including WM Morrison and Sainsbury.
    Hantec Markets analyst Richard Perry said concerns about
Ukraine would continue to peg back the FTSE and other equity
markets.
    West governments blamed pro-Russian forces for shooting down
a Malaysian passenger plane over eastern Ukraine last week and
may step up sanctions against Russia in response.
    "The Ukraine situation has the potential to get ever worse,"
said Perry.

 (Reporting by Sudip Kar-Gupta, editing by John Stonestreet)