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Sector movers: Tobacco and Big Oil pace gains but remain near multiyear lows

By Alexander Bueso

Date: Tuesday 22 Sep 2020

Sector movers: Tobacco and Big Oil pace gains but remain near multiyear lows

(Sharecast News) - Tobacco stocks finished higher against the backdrop of a small bounce for London shares more generally, boosted by an upgrade out of analysts at RBC.




While conceding that investors, including institutional ones, remained very averse to letting either British American Tobacco or Imperial Brands out of the 'Environmental, Social and Governance' penalty box, the two companies had the wherewithal to literally buy back all of their shares in nine and seven years, respectively, they argued.

Hence, the Canadian broker saw fit to upgrade shares of both to 'outperform', in the case of the latter it also hiked its target price from 1,800.0p to 1,900.0p.

"It might deter income investors, but if the tobacco companies' managements - including Imperial Brands' new CEO, from whom we have not yet heard - were to prioritise share buybacks over other uses of free cash flow, we think it would have a significant, positive influence on their total shareholder returns."

Indeed, despite Tuesday's gains shares of both firms remained near multi-year lows.

Similarly, Big Oil was near the top of the leaderboard but shares of BP and Royal Dutch Shell remained uncomfortably near their 52-week lows.

However, General Retailers also performed strongly, boosted by a surge in Kingfisher stock to a fresh 52-week high after the DIY specialist reported a 23.1% jump in first-half adjusted pre-tax profit thanks to a strong sales recovery in the second quarter as more people took on DIY during the lockdown.

Pacing losses were non-life insurers as fresh mobility restrictions were unveiled in the UK and after Beazley said Covid-19 claims are set to double from the $170m expected in April, mainly due to event cancellation losses. Rivals Direct Line and Hiscox were also lower

Top performing sectors so far today

Tobacco 28,458.41 +3.96%

Oil & Gas Producers 3,823.03 +2.79%

General Retailers 2,297.08 +1.87%

Personal Goods 39,082.92 +1.69%

Construction & Materials 6,085.48 +0.93%

Bottom performing sectors so far today

Insurance (non-life) 2,781.54 -4.75%

Oil Equipment, Services & Distribution 3,961.82 -2.08%

Life Insurance 5,671.04 -1.79%

Automobiles & Parts 2,395.47 -1.44%

Real Estate Investment & Services 2,331.77 -0.93%

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