By Carla Mozee, MarketWatch
Tobacco shares rise
LONDON (MarketWatch) -- U.K. stocks fell Thursday, with
oil-and-gas shares leading decliners after oil prices were dragged
to fresh multiyear lows, but shares of EasyJet PLC outperformed the
benchmark FTSE 100.
The FTSE 100 was down 0.2% at 6,813.56, with the oil and gas
group losing more than 3%. U.S. oil futures (CLH5) sat at their
worst level since March 2009, with a sharp drop in prices triggered
Wednesday after a larger-than-expected increase in U.S. crude
supplies. Brent crude-oil prices were slightly higher Thursday
after losing 2.3% in the previous session.
Shares of oil major Royal Dutch Shell PLC (RDSB) were at the
bottom of the FTSE 100 as they dropped 4.3%. Shell was able to post
a rise in fourth-quarter profit on a current cost-of-supplies basis
-- a metric similar to the net profit reported by U.S. oil
companies -- in the face of falling oil prices. That profit rose to
$4.2 billion, compared with $2.2 billion in the same period last
year. But Shell also plans to reduce capital expenditure by about
$15 billion over the next three years.
Also near the bottom of the FTSE 100, shares of oil producer BP
PLC (BP) fell 2.2%, BG Group PLC lost 1.7%, and Tullow Oil PLC
pulled back 1%.
But soaring to the top of the index was EasyJet PLC . Shares
jumped 4.6% after Barclays upgraded the air carrier's rating to
overweight from equalweight and raised its price target by 16% to
21.50 pounds ($32.53), citing strong U.K. demand and an attractive
EasyJet valuation.
Diageo PLC shares swung higher by 3%. They had been lower
earlier after the world's largest liquor company said first-half
profit fell 18%, with sales in North America dropping. Diageo's
brands include Smirnoff, Guinness and Johnnie Walker.
Also, shares of Imperial Tobacco Group and British American
Tobacco PLC were up 1.4% and 0.3%, respectively. Panmure Gordon
began coverage of the U.K. tobacco sector with an overweight
stance. While it's trading close to its historic valuation high,
said Panmure, it's also trading at a significant valuation discount
to other European consumer-goods sectors whose products, like
tobacco, sell quickly.
Regulatory concerns may increase before the U.K. general
election in May, but the completion of the Reynolds American Inc.'s
(RAI) purchase of Lorillard Inc. (LO) "would be perceived as a
positive for both British American Tobacco and Imperial Tobacco,"
said Panmure analyst Jonathan Leinster in an note.
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