London's blue chip index fell one per cent on Friday after tobacco stocks were smoked by news that the US Food and Drug Administration (FDA) may force companies to cut nicotine in cigarettes down to non-addictive levels.
The FTSE 100 closed lower by 74.64 points at 7,368.37, dragged down by British American Tobacco shares which plunged 362p to 4,960p and Imperial Brands which tumbled 130.5p to 3,315.5p.
A decision to lower nicotine levels would be a major blow to the tobacco industry.
Neil Wilson, a senior market analyst at ETX Capital, said: "It's hard to overstate what this could mean for the companies affected: non-addictive levels of nicotine would likely mean a lot fewer smokers and of those people who do still light up, smoking a lot less.
"This will blow a hole in their earnings and forces a fundamental re-evaluation of earnings."
He said regulators in other markets could take similar measures. "This is just the US regulator acting but we can easily see others, particularly in Europe, where regulatory pressures are already extremely high, following suit."
In currency markets the pound was mixed, trading 0.4 per cent higher versus the dollar at 1.311, but lower by 0.2 per cent against the euro at 1.116.
Across Europe, the French Cac 40 and German Dax ended the day down 1.07 per cent and 0.4 per cent, respectively.
Brent crude prices jumped 1.4 per cent to around 52.33 US dollars per barrel, as investors cheered signs that the global glut was easing after US data pointed to another drop in energy inventories.
In UK stocks, Barclays fell 3.5p to 205.1p. The bank swung to a £1.2 billion half-year loss after booking extra compensation costs for mis-selling payment protection insurance (PPI) and taking a £2.5 billion hit from the sale of its Africa arm.
BT dropped 5.75p to 310.4p amid news it will shell out £225 million to Deutsche Telekom and Orange in a bid to avoid legal action after its share price collapsed in the wake of its Italian accounting scandal.
The payout relates to the sale of EE by the duo to BT for £12.5 billion, which left Deutsche Telekom and Orange with stakes in the British firm.
Shares in International Consolidated Airlines Group (IAG) ended the day down 0.5p at 593.5p despite reporting that lower fuel costs and a strong Easter helped half-year operating profit before exceptional items rise 37 per cent to 975 million euros (£871 million).
Away from the top tier, property portal Rightmove saw its shares rise 25p to 4,305p after reporting a 9 per cent jump in pre-tax half-year profits despite growing evidence of a cooling UK housing market.
The biggest risers on the FTSE 100 were Astrazeneca up 156.5p to 4,481.5p, Pearson up 10.5p to 667p, Diageo up 33.5p to 2,442p, and Royal Dutch Shell's 'B' shares up 20.5p to 2,131.5p.
The biggest fallers on the FTSE 100 were British American Tobacco down 362p to 4,960p, Imperial Brands down 130.5p at 3,315.5p, Johnson Matthey down 106p to 2,797p, and Smurfitt Kappa Group down 61p to 2,283p.
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