Market Report: Tobacco groups warned over vanishing smokers

The tobacco companies found themselves among yesterday's major fallers on the blue-chip index, as analysts examined a doomsday scenario in which smoking dies out.

Imperial Tobacco and British American Tobacco declined 37p to 1,982p and 54.5p to 2,426.5p respectively after Citigroup revealed it had data that suggested "it is quite possible that there will be no smokers left in Britain or many other developed countries in about 30 to 50 years".

"Smoking rates appear to be falling in a series of straight lines," said the broker. "If this continues, and it has for 50 years, then it means that the percentage declines in volumes will gradually accelerate."

Stressing that "these trends are extremely long-term in nature", Citigroup nonetheless downgraded Imperial and BAT to "hold", citing shorter-term factors including tax rises in some countries and the increasing amount of generic packaging.

Imperial was also knocked by Goldman Sachs cutting its rating to "neutral", although the broker did reiterate BAT as a "buy" and raise its price target to 3,190p from 2,880p.

The day's trading was focused on the release of the latest non-farm payroll figures from the US, which ended up being rather mixed. Capital Spreads' Angus Campbell noted that it resulted in "indecision amongst investors", which, together with the continued worries over the eurozone's economic situation, meant the FTSE 100 closed down 35.15 points on 5,984.33.

Many of the miners were suffering, as Xstrata dropped 14.5p to 1,500.5p and Rio Tinto fell 10.5p to 4,426.5p. That was despite both being praised by Credit Suisse, which picked out those stocks which are likely to benefit from bond yields increasing.

Meanwhile, Deutsche Bank decided to take a long look at the energy companies, and said that it increasingly feels "that in 2011 the sector offers investors something more than defensive value." Calling gas "a key theme", it upgraded BG Group, which rose 13.5p to 1,325p. However, the broker failed to have the same effect on BP, down 4.4p to 492.5p, despite increasing its price target.

Smith & Nephew was among the losers, retreating 12.5p to 650p as UBS downgraded its advice on the replacement knee and hip manufacturer to "hold", pointing out that the "risk/reward" for the stock is "more finely balanced". Yet it did add that the company, which continues to be the subject of takeover speculation, remains on its merger-and-acquisition watchlist.

The group was also harmed on the read-across from US peer Biomet – one of the names gossiped about as being a potential bidder – whose latest update seemed to signal that the orthopedics market is not recovering as quickly as had been hoped.

Despite claiming its net asset value could be as high as 625p a pop, Capital Shopping Centre's share price edged down 10.9p to 408.2p. The announcement was an attempt to ward off attention from the US group Simon Property, which made an indicative offer of 425p a pop last month.

"In our view, the bottom line of [the statement] from CSC is that there is now no scope for a recommended offer from Simon emerging before the put-up or shut-up deadline of 12 January," said David Brockton, an analyst at Espirito Santo Investment Bank.

The biggest mover on the FTSE 250 was JKX Oil & Gas, which slumped to the bottom of the mid-tier index. The group ended the day more than 10 per cent weaker after being knocked back 33.8p to 286.5p by the Ukrainian government's decision to change its tax code. As a result, according to the company, its Poltava Petroleum Company (PPC) unit will now have to pay around 50 per cent tax, up from 30 per cent.

Matrix said it is waiting for more details on the change in PPC's rate, but said the news "is likely to reduce our valuation by approximately 10 to 11 per cent". Its analyst Vugar Aliyev added that perhaps more important is the fact that "it will have a material impact on the company's near-term operational cash flows".

JD Sports Fashion found itself in vogue, as investors reacted well to its Christmas trading statement, pushing it up 29.5p to 895p. Unlike many of its peers, the retailer said it was "largely unaffected" by December's extreme weather, and added that its full-year profit would beat market forecasts.

Travis Perkins moved forwards 26p to 1,082p after its Irish rival Grafton announced that it was buying 10 of the plumbing and heating branches owned by the builders' merchant. Grafton also said that an improvement in its sales in Britain had helped its full-year revenue to match forecasts.

Small-cap pawnbroker H&T put on 15p to 335p as it revealed that 2010 had seen more customers than ever exchanging their valuables for cash. The company commented that an increase in the value of gold and the opening of a number of new stores were the main drivers behind its success, although the recent downturn in the economy had also played its part.

FTSE 100 Risers

GKN 229.7p (up 9.7p, 4.41 per cent)

Engineering group continues strong recent run, having nearly doubled its share price in the last six months.

J Sainsbury 391.5p (up 4.2p, 1.08 per cent)

One of the major risers ahead of Wednesday's release of its third-quarter trading statement.

Next 2,087p (up 13p, 0.63 per cent)

HSBC cuts its advice on retailer to "neutral", yet Royal Bank of Scotland raises it to a "buy" recommendation.

FTSE 100 Fallers

ARM Holdings 459.6p (down 22.4p, 4.65 per cent)

Biggest faller as investors indulge in profit-taking following recent big gains.

AstraZeneca 2,989p (down 37p, 1.22 per cent)

US regulators push back deadline for verdict on drug company's new thyroid cancer pill.

Unilever 1,906p (down 22p, 1.14 per cent)

Drops despite Goldman Sachs raising its target price to 2,760p from 2,350p.

FTSE 250 Risers

Hays 132.1p (up 5.4p, 4.26 per cent)

Has its price target raised by J.P. Morgan, Bank of America, Merrill Lynch and Goldman Sachs.

EasyJet 474p (up 19p, 4.18 per cent)

Airline reveals that its passenger traffic numbers for December were up 7.6 per cent year-on-year.

Aberdeen Asset Management 216p (up 3.2p, 1.5 per cent)

Fund manager benefits from J.P. Morgan putting it on its "focus list".

FTSE 250 Fallers

Fenner 342.6p (down 13.2p, 3.71 per cent)

Falls back as Panmure Gordon cuts its recommendation to "hold" from "buy".

Bellway 680.5p (down 19.5p, 2.79 per cent)

Housebuilder says its full-year numbers will rely on consumer sentiment over the spring season.

Supergroup 1,233p (down 32p, 2.53 per cent)

Clothing retailer slips as it prepares to reveal its Christmas trading statement on Wednesday.