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Capital Calls: U.S. regulatory cloud chocks tobacco stocks, again

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LONDON, April 20 (Reuters Breakingviews) - Concise insights on global finance in the Covid-19 era.

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SMOKE SIGNAL. Big Tobacco’s regulatory blowback is here again. Joe Biden’s administration is considering a rule that would limit nicotine or ban menthol in cigarettes, the Wall Street Journal reported late on Monday, citing sources. That sent shares in British American Tobacco (BATS.L), Imperial Brands (IMB.L) and Swedish Match (SWMA.ST) down more than 5% on Tuesday morning. Altria (MO.N) in the United States also closed down more than 6% on Monday.

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The U.S. Food and Drug Administration has mulled a ban on menthol for years, but the plan was shelved in 2019 when its key driver Scott Gottlieb left. The consolation for the sector is that if Biden is going after Big Tobacco, it could take years to implement. But $92 billion London-listed BAT derived nearly half its operating profit from the United States last year, and 25% of its revenue came from menthol, Morningstar analysts reckon. That, plus the rise of ethical investing and prior struggles to get non-tobacco products off the ground, suggests difficulties ahead. (By Karen Kwok)

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