* FTSE 100 index slips 0.4 percent, down for the year
* Index underperforms European bourses
* Imperial, BATS fall after report of China smoking ban
* Sainsbury slips after cautioning on outlook
By Alistair Smout
LONDON, Jan 8 Britain's top share index fell on
Wednesday, pulling it back into negative territory for the year,
after regulatory concerns knocked back tobacco companies and
Sainsbury issued a cautious outlook.
The FTSE 100 was down 26.05 points, or 0.4 percent,
at 6,729.40 by 1551 GMT. It remains pinned in a 70-point trading
range this year, 2 percent off 2013's high.
The index underperformed major continental markets in
Europe, especially the peripheral markets, which continued a
recent streak of outperformance.
"European markets we expect to lead the way, especially in
the euro zone, and I'm fairly bullish moving forward," Mike
McCudden, head of derivatives at Interactive Investor, said.
"The FTSE in percentage terms will underperform, but the UK
economy should still reap some of the rewards from the
continent. It's natural to pause here (after a strong December
rally), but going forward it's still looking good."
Imperial Tobacco fell 2.8 percent and British
American Tobacco 0.7 percent, after reports that
China's health officials wanted to ban smoking in public places
by the end of this year.
"With China, there's a lot of concern over smog and air
pollution. The doors have been flung open with regards to
reform, and with that will come a change in standards with
regards to healthcare," said Alastair McCaig, an analyst at IG.
"It will increasingly become the focus, and that's a battle that
tobacco companies are going to have to face in the coming
So-called defensive stocks outperform in times of economic
uncertainty, and the tobacco sector gained strongly
in the first half of 2013, climbing 15 percent. But since then
it has given up its gains as investors rotate into stocks that
do well as the economy expands.
Consumer staples, a broad sector including tobacco stocks
and food retailers, took 11.5 points off the index in total,
with J Sainsbury also weighing on the market. The
grocer fell 2.5 percent after its chief financial officer
lowered the company's growth forecast.
The drop came despite a strong start. The company reported
that sales at its stores open over a year rose 0.2 percent in
the 14 weeks to Jan. 4, beating forecasts, which ranged from
flat to down 1 percent.
Barclays reiterated an "overweight" rating on the stock
following the call, saying that it believed the firm was upfront
about challenges because it was prepared for them.
"We think that it was rather revealing that the CFO
commented on the call that the tough 4Q (comparatives) were very
visible and that it was reasonable to conclude Sainsbury would
have planned ahead ... We think that the negative share price
reaction this morning is somewhat surprising," analysts at
Barclays said in a note.
"It is of course true that the cut in (like-for-like) sales
guidance is unwelcome, but it is a much lower cut than the
market could reasonably have expected given where consensus 3Q
LFL estimates stood."