Market Report: Tobacco report helps Imperial light up

It may have been No Smoking Day, but that did not stop Imperial Tobacco's shares lighting up last night as a long-awaited report from the Government was greeted with relief.

Expectations were high that the Tobacco Control Plan – revealed yesterday – would introduce legislation forcing cigarettes to be sold in generic packaging. But ministers only ended up announcing a consultation on the issue, although a ban of tobacco products being displayed in shops will be introduced from April 2012.

Imperial reacted by shifting up 66p to 1,978p, helped by Bank of America Merrill Lynch changing its rating to "buy". The broker described the report as "benign", saying the Government's comments "seem in line with our expectations that plain packaging is unlikely in the UK, at least in the near term".

It was also dismissive of the new legislation on shop displays, claiming "in markets that have implemented display bans to date, there has been no noticeable impact on consumption".

Meanwhile, Collins Stewart issued a "buy" note on Imperial, with its analysts saying it has underperformed the market in 2011 despite last month's interim management statement being "the most encouraging in some time from the group".

However, British American Tobacco was unable to match Imperial's performance, falling 70.5p to 2,436.5p as it went ex-dividend.

Overall, with the unrest in Libya still hitting sentiment, the FTSE 100 spent the entire session in the red and closed 37.46 points weaker at 5,937.3.

The results of the latest quarterly review of the indices were announced after the bell, confirming that next week will be the last on the top-tier index for African Barrick Gold, Alliance Trust and Bunzl. Taking their place will be John Wood, ITV and Hargreaves Lansdown, and the FTSE 250 will also bid farewell to Hansen Transmissions, McBride and Sportingbet, with Kofax, Northgate and Hansteen Holdings their small-cap replacements.

International Consolidated Airlines, the product of the merger between British Airways and Iberia, may have suffered a torrid time since its debut on the market in January, since when it has dropped nearly 20 per cent, but yesterday it found itself on the leaderboard, advancing 4p to 232.6p. It was up – along with a number of its global peers – thanks to a read-across from Cathay Pacific Airways, with Hong Kong's flag carrier smashing forecasts.

Also finishing in the blue was Rolls-Royce, which powered ahead 19p to 619.5p, as the engineering giant announced it had made a €24-a-share bid, together with Daimler, for Tognum. Despite the German engine-maker welcoming their attempt in principle, it told them to raise the amount offered.

There were also some major staff movements at Lloyds Banking Group, which announced that the heads of its retail and insurance businesses were departing. Antonio Horta-Osorio has been chief executive of the group since the start of the month, and Exane BNP Paribas' analyst Ian Gordon said the market "may broadly welcome his clean break with the old regime", although yesterday Lloyds edged back 0.13p to 61.39p.

Prudential climbed to a four-year high as the insurer was lifted up 35p to 749p after revealing an operating profit for 2010 that was above expectations. However, Tullow Oil's full-year results left it floundering, dropping 47p to 1,413p, despite its pre-tax profit increasing by a massive 361 per cent.

Yet this was still lower than forecasts, while the oil company said it had not received the green light from the Ugandan government for a joint venture in the country.

On the FTSE 250, the Restaurant Group – owner of a number of chains including Frankie & Benny's and Garfunkel's – was bumped up 26.3p to 306.1p, finishing at pole position.

The latter establishment was singled out for particular praise in its final results, with the group's profits rising 17 per cent. Sports Direct gained 1.8p to 182p as it announced no one at the company was still under investigation by the Serious Fraud Office following its probe into the chain's 2009 acquisition of a number of stores from JJB Sports. The retailer also revealed a new banking facility worth £220m.

After giving it a boost on Tuesday, vague takeover speculation was still making its presence known around Heritage Oil, and the oil and gas explorer moved 22.9p higher to 304.9p.

Down among the small-cap groups, the news that the Irish company Greencore has lost its appetite for Northern Foods saw the maker of Fox's biscuits slip back 1.5p to 72.75p. The two had originally agreed a merger last November, but the chicken magnate Ranjit Boparan's all-cash offer for Northern Foods ultimately proved more attracting, and Greencore has now said it will not increase its bid.

Elsewhere, Johnston Press plummeted 2.33p to 9.92p as the newspaper publisher revealed cuts in Government spending have already knocked its advertising revenue this year.