FTSE 100 dips as tobacco shares mixed

(Close): News of British American Tobacco's planned merger with US cigarette company Reynolds had a mixed effect on the sector.

Shares in BAT itself closed down 2.85%, while rival Imperial Brands climbed 2.7%.

BAT wants to buy the 57.8% of Reynolds it does not already own.

Fashion house Burberry was the biggest riser on the FTSE 100, up 3.1%, on a report that US luxury goods company Coach was mulling a merger.

The FTSE 100 index closed 6.43 points lower at 7,020.47.

Shares in Intercontinental Hotels Group fell 2% after it reported slowing revenue growth.

The key measure of revenue per available room (RevPAR) grew by 1.3% in the three months to 30 September, down from a rate of 2.5% in the previous quarter.

The company said it had seen "significant" declines in RevPAR in France, Turkey and Belgium amid "challenging trading conditions". All three countries have seen demand from tourists slow following terror attacks.

In the FTSE 250, shares in Acacia Mining jumped 12.75% after the company, which owns gold mines in Africa, raised its forecast for production from its Tanzania mines.

On the currency markets, the pound fell 0.37% against the dollar to $1.2208, but rose 0.18% against the euro to €1.1233.