Wednesday 23 October 2019

Thomas Cook’s collapse props up FTSE 100 after Germany slips closer to recession

The travel agent helped its rivals boost their share price, but traders remain concerned after new European economic data disappoints.

A sign at the empty Thomas Cook check-in desks at Gatwick Airport in Sussex as the 178-year-old tour operator ceased trading with immediate effect (Steve Parsons/PA)
A sign at the empty Thomas Cook check-in desks at Gatwick Airport in Sussex as the 178-year-old tour operator ceased trading with immediate effect (Steve Parsons/PA)

By PA City Staff

The demise of the world’s oldest travel agent gave its rivals on the FTSE 100 a boost as one less competitor made investors more positive.

But Thomas Cook’s collapse and the rise in TUI, easyJet and On The Beach was not enough to stave off fears that Europe is heading closer to a recession.

Data from French and German businesses released on Monday was particularly concerning to investors, with the latest manufacturing PMIs in Germany coming in at just 41.4 against a forecast of 44.6. Anything below 50 is a sign of contraction.

The market never leaves time to mourn. In other words, investors swiftly moved to potential winners in the travel sector following the collapse of Thomas Cook Connor Campbell, financial analyst at SpreadEx

David Madden, market analyst at CMC Markets UK, said: “Germany is the powerhouse of Europe, but the manufacturing PMI reading was the weakest in over a decade, hence why there is selling pressure. Trade tensions between the US and China are being felt around the world, which is a factor in the poor eurozone manufacturing updates.”

The mixed messages emerging from the US-China trade talks over the weekend also exacerbated an already nervous market.

By the end of play, the FTSE 100 ended the day down 18.84 points at 7,326.08, recovering from a 75-point loss in the first hour of trading.

Germany’s Dax lost 1% on the day and France’s Cac was off by 1.1%.

The pound got dragged down against the dollar as a result of the weak eurozone numbers having an impact, along with uncertainties over Labour and the Government’s Brexit policy, and was down against the euro too.

A pound fell 0.11% against the euro to 1.1303 and against the dollar by 0.37% to 1.2427.

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Thomas Cook’s collapse triggered big rises in easyJet, TUI and On The Beach’s share price (Kirsty O’Connor/PA)

The price of oil continued to trade steadily, barely moving from 64 dollars a barrel, as traders appeared to welcome the weekend news that the US is to send troops to Saudi Arabia to protect its oil supply.

By market close, Brent crude was down 0.08 cents at 64.20 dollars a barrel.

In company news, the market was remarkably quiet, even for a Monday.

But Mike Ashley’s Sports Direct continued its marathon takeover spree of retail and leisure opportunities, snapping up five-a-side football pitch operator Goals Soccer Centres for £4 million.

Sports Direct is already the biggest shareholder, with nearly 19% of the company, but the current board said it would need time to consider the offer.

Shares have been suspended since March over an accounting scandal which remains unresolved. Sports Direct shares climbed 1.6p to 281.2p

But all the company movement came from Thomas Cook. The biggest riser on the FTSE 100 was rival TUI, which saw shares close up 60.8p at 901.4p. Online-only travel rival On The Beach saw its shares jump 35p to 415p and easyJet made gains of 49p to 1,106.5p.

Connor Campbell, financial analyst at SpreadEx, said: “The market never leaves time to mourn. In other words, investors swiftly moved to potential winners in the travel sector following the collapse of Thomas Cook.”

The biggest risers on the FTSE 100 were TUI up 60.8p at 901.4p; Fresnillo up 25p at 742.4p; Unilever up 72.5p at 4,867.5p; Compass Group up 26p at 2,030p and Relx up 22p at 1,879.5p.

The biggest fallers were NMC Health down 208p at 2,702p; Smiths Group down 79p at 1,559p; Micro Focus down 51p at 1,119.8p; Marks and Spencer down 6.35p at 189.5p and Glencore down 7.5p at 249.05p.

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