Market Report: Tobacco victory could be a drag on SABMiller

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The Independent Online

Last week's Florida appeal court win in a $145bn damages claim against the tobacco industry could have unforeseen results for SABMiller, London's largest quoted brewer. The rumour in the market is that, thanks to winning the case, Altria may now seek to offload its 28 per cent stake in SAB, worth more than £4bn.

Altria, known as Philip Morris in the days before companies needed image consultants to dream up names, is the world's largest tobacco group and is thought to want to free up the cash tied up in SAB to accelerate the consolidation of the tobacco industry. Traders say a placing on that scale is likely to mean that SAB shares will continue to underperform the market until the sale is completed. SABMiller shares fell 4.5p yesterday to close at 965.5p, 19.3 per cent below the high for the year.

After a strong debut in the markets on Monday, the Edinburgh-based life and pensions group Standard Life found the going tougher on day two. Most analysts agree that the shares were priced low in an effort to make sure that the offering went well, but insurance companies tend to track the markets and Standard Life drifted 2p lower to 240.5p.

Weak Asian markets overnight and disappointing second quarter revenue numbers from the US mining giant Alcoa set the tone for London trading, and the FTSE 100 index was in negative territory almost all day, closing down 39.6 at 5857.3. Alcoa's warning meant a bad day for most London listed commodity stocks, with copper miners Kazakhmys 32p worse at 1,189p and Vedanta Resources 22p weaker at 1,370p.

With the wider market drifting lower, winners were few and far between in the main index. AB Foods attracted support after comments by Marks & Spencer chief executive Stuart Rose, who said that the main threat for M&S in clothes retailing was coming from discount operators such as the AB Foods-owned Primark and supermarkets. Brokers are also excited by the recent joint venture in ethanol production alongside BP and DuPont, and AB Foods shares were 4.5p firmer by the close at 816p.

Buyers were in short supply at the home improvement retailer Travis Perkins as rumours did the rounds that the group is poised to deliver an earnings warning ahead of the interim results, due on 1 August. The poor showing by rival B&Q, part of Kingfisher, which reported a 74.7 per cent drop in pre-tax profit in late May, has led some traders to believe that Travis Perkins will fall short of forecast results. Shares in Travis Perkins declined by 32p to close at 1,408p, while Kingfisher shed 2.5p to 233p.

The word in the market is that Taylor Nelson Sofres, the consumer research group that warned on US sales last week, has not finished delivering bad news to investors. One analyst said that he expected the group to warn again, with little sign of improvement in trading, and investors look like they are thinking the same way. The shares lost another 10p to close at 171.5p, a fall of 8.3 per cent. JP Morgan added to TNS's woes by cutting its target price to 216p from 277p.

Technology shares were out of favour again after the US giant Lucent Technologies missed its forecast numbers on Monday afternoon for what seems like the umpteenth time. Chip makers Wolfson Microelectronics tanked 59p to 386.25p, and CSR, 89p weaker at 1,100p, was hit by poor sales of LCD televisions during the World Cup. The software group Autonomy was also hit by a bout of profit taking after Monday's strong trading update and gave up 16.5p to 409.5p.

There was a sharp bounce in MonsterMob after shares in the mobile telephone content provider collapsed after Monday's profit warning. Some traders believe that the fall was well overdone and that the shares could easily track back up to the 100p mark over the next few sessions. A 5p rise to 61p put the shares among the top performers in the small cap sector although rival IGM, also hit by changes to the regulatory environment in China, continued to slide, falling another penny to 14.5p.

Inter Link Foods was well up the small cap leaderboard after results came in slightly ahead of forecasts. There have been widespread rumours in recent weeks that the company was poised to issue another profit warning after May's shock announcement, and short sellers struggled to close positions as the shares soared to close 48.5p firmer at 387.5p.

Finally, shareholders in First Artists Group, the sports and entertainment agency, will be watching the results of the Italian football scandal with interest. Should Juventus, Inter Milan, Lazio and Fiorentina be relegated, as prosecutors are demanding, most observers expect a fire sale of top talent. First Artist, through its Promo Sport subsidiary, looks after several players at the clubs, and could cash in on transfer fees. The shares added 0.37p to 7.37p as the group also unveiled a sharp rise in pre-tax profits.