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Highlights
Defensive tobacco names hold firm during the selloff
AI infrastructure cost worries drive a flight to safety
FTSE 100 finds support from cash-generative shelters
Why are tobacco names back in favour?
Imperial Brands (LSE:IMB) and British American Tobacco (LSE:BATS) occupy a particular niche within the FTSE 100: they are mature, cash-generative consumer businesses whose demand profile tends to be relatively insensitive to the economic cycle. In moments of broad market stress, that quality becomes a magnet for capital. With a global de-risking episode underway, sparked by reports questioning the affordability of AI build-outs and the timeline for major technology listings, investors have gravitated toward names that promise stability. The tobacco majors fit that description, and their firmer tone today helped cushion the wider benchmark against the pressure radiating from more growth-sensitive corners of the market.
How does the AI backdrop shape the rotation?
The catalyst for the current bout of caution lies overseas, where a reassessment of technology valuations has been gathering pace. Reports that a leading artificial-intelligence company may push back its public listing, combined with weakness in major US hardware names, have prompted a wider rethink of long-duration growth exposure. That kind of reassessment rarely stays contained. It tends to ripple outward, lifting demand for defensives and pressuring the cyclical and commodity-linked parts of the market. London's blue-chip index, with its blend of resources, financials and steady consumer staples, has felt both sides of that dynamic, and the firmness of its defensive contingent has been a notable feature of trade.
What sets these defensive large-caps apart?
Imperial Brands (LSE:IMB) and British American Tobacco (LSE:BATS) are characterised by reliable revenue streams and a long history of returning cash to shareholders, traits that earn them a reputation as classic defensive holdings. When markets turn skittish, that profile tends to attract investors looking to dial down risk without exiting equities altogether. The current environment, marked by political uncertainty at home and a jittery global growth narrative abroad, plays to those strengths. Their resilience today is a reminder of how the composition of the FTSE 100, spanning both racy cyclicals and dependable staples, allows the benchmark to find ballast even when sentiment elsewhere is fraying.
