UPDATE 2-FTSE 100 ends worst session in nearly two-months; cigarette makers, oil stocks weigh

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* BATS, Imperial Brands slump on nicotine cut fears
* Elementis drops after rejecting takeover bid
* AB Foods falls on a 50% drop in first-half profit
* FTSE 100 down 2.0%, FTSE 250 off 1.7%

(Updates to close)
By Devik Jain and Shashank Nayar
April 20 (Reuters) - London's FTSE 100 ended lower on
Tuesday, dragged down by stocks of heavyweight oil companies and
cigarette makers, while Associated British Foods slipped after a
downbeat first-half earnings update.
The blue-chip index .FTSE dropped 2%, the highest single
day fall since Feb. 26, with tobacco firms British American
Tobacco BATS.L and Imperial Brands IMB.L declining 7.6% and
7.3%, respectively, after a report said the United States was
considering a rule to cut nicotine in all cigarettes sold in the
country to levels at which they are no longer addictive.
Shares of AB Foods ABF.L fell 5.9% after it posted a 50%
drop in first-half profit, hurt by COVID-19 lockdowns that
shuttered its Primark fashion stores. "This seems somewhat of an overreaction given that this
isn't a surprise and while the stores have been closed for a
good part of the last 12 months, its other businesses have
performed better than expected," said Michael Hewson, an analyst
at CMC Markets.
Sterling GBP= hit its highest in more than six weeks
against the dollar, further weighing on the FTSE 100, many of
whose constituents earn most of their revenues overseas and see
their repatriated profits eroded by a stronger pound.
"While today's losses are quite large, they don't appear to
be being driven by concerns over the economic outlook," said
Hewson.
The domestically focussed mid-cap FTSE 250 index .FTMC
fell 1.72%, with Elementis ELM.L reversing early gains to end
1% lower after it rejected a 160-pence per share takeover
approach from the U.S. chemicals firm Innospec Inc IOSP.O .
Meanwhile, official figures showed Britain's unemployment
rate unexpectedly fell to 4.9% in the December-February period,
although tax data showed the number of employees on company
payrolls fell by 56,000 between February and March, the first
decline in four months. The FTSE 100 index has gained 6.2% so far this year, but has
underperformed its European peers during the period as a recent
rise in Treasury yields and a jump in coronavirus infections
across the globe weighed on sentiment.
Among other stocks, cyber security company Avast AVST.L
jumped 1.3% after upbeat first-quarter trading update.
= 0.7143 pounds)