* FTSE 100 index closes 0.3 percent lower
* Ukraine worries keep a lid on equity markets
* Tobacco stocks hit after $23.6 bln fine on RJ Reynolds
* Tesco up after it says CEO is leaving
By Atul Prakash
LONDON, July 21 Britain's top share index fell
on Monday, with tobacco stocks hit by a multi-billion-dollar
fine against RJ Reynolds in the United States and
retailers slipping after a profit warning from Tesco.
The prospect of further sanctions by the West against Russia
over last week's downing of an airliner over Ukraine also
discouraged investors from making big bets, analysts said.
Britain warned Russian President Vladimir Putin that the
Russian economy would face further sanctions unless Moscow
cooperated in providing full access to the Malaysia Airlines
crash site and stopped stoking instability in Ukraine.
"Heightened geopolitical tension is part of the reason for
the sell-off today. After a good short-term rally, investors
have become cautious as there is a lot of uncertainty," James
Butterfill, global equity strategist at Coutts, said.
The blue-chip FTSE 100 index ended 0.3 percent lower
at 6,728.44 points, with tobacco stocks, retailers and energy
shares among the top decliners.
A 0.9 percent fall in British American Tobacco and
a 1.5 percent drop in Imperial Tobacco took the most
points off the FTSE 100 index, after a Florida jury imposed
punitive damages of $23.6 billion against RJ Reynolds Tobacco
"Investors are concerned that if this verdict doesn't get
quashed when it goes to appeal, then this could have severe
implications for the entire industry," said David Battersby, an
investment manager at Redmayne-Bentley.
The market also came under pressure following a drop in UK
retailers after a profit warning by Tesco, Britain's biggest
retailer. Shares of rival supermarkets WM Morrison and
Sainsbury fell 2.4 percent and 2 percent respectively.
However, Tesco rose 1.3 percent after the group announced
its boss Philip Clarke will quit. Clarke will be replaced by
Unilever executive Dave Lewis, who is credited with
revamping a number of businesses at the consumer goods group.
More recently, Tesco has been squeezed between discounters
Aldi and Lidl at one end and upmarket grocers such as John
Lewis's Waitrose at the other, and hurt by the slowest growth in
the overall UK grocery sector for a decade.
"There's some relief that Clarke is leaving, allowing the
company to have a fresh start," Spreadex sales trader Lee
Battersby of Redmayne-Bentley said that in order for the
pressure to recede, UK retailers like Tesco have got to compete
on an equal footing with the discounters. "That's why I believe
that their margins are going to erode."
Insurance shares showed little reaction to news that pension
reforms would be expanded further, with workers getting more
flexibility to cash in their pension savings.
Analysts said the news was largely expected and weakness
among insurers was in line with risk aversion in the broader
market. Legal and General, Aviva and Standard
Life were flat to 0.5 percent lower.
(Additional reporting by Sudip Kar-Gupta; Editing by Larry