The FTSE 100 has wiped out all of last week’s gains and more as it plunged 2% on Tuesday amid a bad day for big tobacco.
The index joined in a global stock market rout on Tuesday, ending the day at 6,859.87, down 140.21 points.
It pushed it back through the symbolic 7,000 point mark that the FTSE smashed last week for the first time since February last year.
US indexes S&P 500 and Dow Jones were both trading down around 0.9% when European markets closed. In Germany the Dax fell 1.6%, while the Paris-based Cac dropped 2.1%.
“While today’s losses are quite large, they don’t appear to be being driven by concerns over the economic outlook. If they were copper prices wouldn’t be firmer and the US dollar wouldn’t be weaker,” said CMC Markets chief market analyst Michael Hewson.
In London the severe drop was led by tobacco companies. The Wall Street Journal reported that the Biden administration is considering a ban on menthol products and a cap on the level of nicotine in cigarettes to make them less addictive.
Shares in British American Tobacco plummeted 7.6%, with Imperial Brands not far behind, down 7.3%.
Primark owner Associated British Foods also suffered a heavy fall after revealing a halving of profit for the year and revenue down 18%.
British Airways owner IAG was however Tuesday’s worst performer, dropping more than 8%.
“Airline stocks are also getting a bit of a pounding after the UK put India on the red list for flights, while there is also rising concern about increasing cases across Asia, with Japan a particular concern,” Mr Hewson said.
“With the French government also increasing its stake in Air France KLM, and the airline raising another 1 billion euros, it would appear that this has also spooked the markets, in a sign that any recovery in this sector is likely to take a lot longer than had originally been anticipated.”
By the end of the day sterling had fallen 0.3% against its European and US rivals. One pound now buys 1.395 dollars or 1.1586 euros.
The price of Brent crude oil dropped 1.3% to 66.17 dollars per barrel.
Mulberry said that it would transform its supply chain by the end of the decade in a sustainability drive. Shares were down 2.5%.
Shares in Next fell 3.9% on the day it revealed that chief executive Lord Simon Wolfson would be paid £3.4 million for the most recent year, a 28% rise.
The biggest risers on the FTSE 100 were Segro, up 15.9p to 1004.5p, Polymetal, up 23p to 1578p, Avast, up 6p to 477.6p, AstraZeneca, up 76p to 7494p, and Halma, up 18p to 2562p.
The biggest fallers on the FTSE 100 were IAG, down 17.05p to 193.1p, British American Tobacco, down 221.5p to 2692.5p, Imperial Brands, down 115.5p to 1465.5p, AB Foods, down 146p to 2314p, and Rolls-Royce, down 5.9p to 99.28p.