* FTSE 100 index down 0.4 percent
* Imperial, BATS fall after report of China smoking ban
* Sainsbury slips after cautioning on outlook
By Alistair Smout
LONDON, Jan 8 Britain top share index fell on
Wednesday, led down by defensive stocks after regulatory
concerns knocked back tobacco firms and J Sainsbury
turned negative after cautioning over its outlook.
Imperial Tobacco and British American Tobacco
fell 2.4 percent and 1 percent respectively, with
traders citing a report Hong Kong's South China Morning Post
newspaper that health authorities in China aim to roll out a
nationwide smoking ban in public places by the end of this year.
The falls trimmed over 4 points off the FTSE 100,
which was down 26.66 points, or 0.4 percent, at 6,728.79 by 1122
"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," Alastair McCaig, analyst at IG, said.
"It will increasingly become the focus, and that's a battle
that tobacco are going to have to face in the coming years."
Defensive stocks outperform in times of economic uncertainty
and the tobacco sector gained strongly in the first
half of 2013, climbing 15 percent. However, since then, it has
given away its gains, as investors rotate into stocks more
sensitive to growing economic optimism.
Consumer staples, a broad sector including tobacco stocks
and food retailers, took 10 points off the index in total, with
J Sainsbury also weighing on the market. The grocer
fell 2 percent after its chief financial officer lowered the
company's growth forecast.
The drop came despite a strong start after reporting 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 nevertheless 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."