Market Report: BAT provides safe haven for worried investors

With the top-tier index awash with red, British American Tobacco (BAT) was among the defensive stocks benefiting from investors fleeing for safer ground as the cigarette company was praised for offering long-term value.

BAT – whose brands include Lucky Strike and Dunhill – advanced 8.5p to 2,494p after Jefferies International initiated coverage on it with a "buy" rating. Calling the group the "king of cash", the broker's analyst Dirk Van Vlaanderen said BAT was "the best-in-class company in our fast-moving consumer goods universe when it comes to return on invested capital, cash conversion and economic value added".

Mr Van Vlaanderen also praised it as a play on emerging markets, describing its exposure as "exceptionally well-balanced". However, he was less positive on its blue-chip peer Imperial Tobacco, which closed 19p better off at 1,978p, giving it a "hold" recommendation and saying it has "a higher regulatory risk profile" because two-thirds of its revenue come from mature markets.

Among the other companies in demand for their defensive qualities were the pharmaceutical groups, with GlaxoSmithKline, AstraZeneca and Shire putting on 9p to 1,234p, 15.5p to 2,982p and 2p to 1,841p respectively.

After a day heading south, the FTSE 100 eventually closed 88.97 points weaker at 5,964.47, ignoring encouraging inflation numbers as the nuclear situation in Japan worsened.

Adding to the gloom was the release of the latest figures from the British Retail Consortium, which showed a large drop in total sales last month of 1.9 per cent. Despite the news, however, there were no dramatic falls among the retail sector, as Marks & Spencer edged forwards 1.1p to 360.6p while Debenhams ticked up 0.55p to 64.9p.

It was the miners – which have enjoyed a strong rise recently – that saw the worst performances after the sector was hit by two blows. The first came from the US, where the earnings season kicked off late on Monday in disappointing fashion as the aluminium group Alcoa's first-quarter update failed to meet its revenue forecasts.

In addition, analysts from Goldman Sachs announced they were recommending to clients that they should stop betting on a range of commodities, including crude oil, copper and platinum, rising.

The wooden spoon was taken by Fresnillo, declining 85p to 1,576p, while Antofagasta – down 74p to 1,411p – and Kazakhmys – down 74p to 1,419p – were not far behind. Ferrexpo was the biggest faller on the mid-tier index, shedding 32.9p to 442.1p, as UBS downgraded its rating to "neutral", citing the strong performance of its share price.

Goldman's cautious words on oil prices prompted the value of the black stuff to see a rare fall, providing some relief for the travel groups. The cruise giant Carnival finished top with a surge of 110p to 2,476p, while International Consolidated Airlines was 9.6p ahead at 225.1p when the bell rang.

TUI Travel enjoyed itself as well, moving forwards 2.3p to 232.4p, though Thomas Cook was knocked back 0.3p to 169.4p. National Express managed to gain, however, driving forwards 10.8p to 250.1p after the activist investor Elliott Advisors announced that one of the transport group's largest shareholders, the Cosmen family, supports its proposed boardroom changes ahead of a vote on the issue next month.

Punch Taverns was drowning its sorrows on the FTSE 250 as the pubs group slipped back 4.2p to 75.3p in the wake of its interim results. Its first-half profit saw a fall of 8 per cent, though the company did add that it would manage to meet its forecasts for the full year.

The wealth manager St James's Place shifted down 7.9p to 341.2p as UBS turned bearish, cutting its advice to "neutral" from "buy". Noting that its share price has put on nearly a third in 2011, the broker made the move because of "the increasing odds of Lloyds Banking Group selling its 60 per cent stake", saying the bank now knows it does not need it to satisfy its capital requirements.

Cable & Wireless Worldwide (CWW) saw a decline of 0.3p to 50.9p despite analysts claiming it would benefit from news of consolidation elsewhere in the telecommunications sector. The US group Level 3 Communications revealed on Monday that it is buying its rival Global Crossing in a deal worth around $1.9bn, which Investec said "signals international market repair, and the potential attraction, and underlying value, of just one part of the CWW business".

Down on the small-cap index, Game was driven back 4.5p to 49.5p after UBS decided to reduce its rating to "sell". Describing the Nintendo 3DS as "the big hope for 2011", the broker's analysts said sales at the video game retailer would suffer because of supermarkets selling the handheld console at a sizeable discount.

Meanwhile, at the other end, Southern Cross pushed up 0.35p to 10p following the news that the chairman of the troubled care homes group, Ray Miles, has left.