BAT shares fell 8.4%, its biggest percentage drop in more than three years, after it said it would take a hit of around $31.5 billion as it writes down the value of some U.S. cigarette brands. Shares of U.S. tobacco firms Altria and Philip Morris fell on the news.

BAT was the biggest decliner in the blue-chip FTSE 100, which closed up 0.3% but lagged its European peers.

"Smokers continue to switch to next generation products including vaping and that has prompted British American Tobacco to take a long-term view about the value of its assets in the combustibles category," noted AJ Bell investment director Russ Mould.

"Naturally that's going to have a negative impact on near-term financial results and so the share price has fallen once again and is now down 30% year-to-date."

U.S. stocks edged higher after data pointed to cooling labour market, prompting traders to price in rate cuts as soon as next March from the Federal Reserve.

However, Bank of England Governor Andrew Bailey said interest rates in Britain will need to stay at current levels for some time, adding that the outlook for inflation was uncertain.

The domestically focussed FTSE 250 midcap index added 1.0%, with London-listed shares of TUI surging 14.8% after Europe's biggest travel operator forecast operating profit would jump 25% this year.

Airline stocks including British Airways-owner IAG, Wizz Air and easyJet climbed as Brent crude fell nearly 4% to $74.41 after a bigger-than-expected rise in U.S. gasoline inventories. [O/R]

Ten Entertainment soared 31.9% to a record high after the bowling venue operator agreed to a 287 million pound ($361.5 million) buyout deal from U.S. private equity firm Trive Capital.

(Reporting by Shashwat Chauhan and Sruthi Shankar in Bengaluru; Editing by Varun H K and Toby Chopra)

By Shashwat Chauhan and Sruthi Shankar