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Capital Markets

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Categorized | Equities

Thomas Cook hits travel stocks

Posted on November 26, 2014

Travel stocks missed out on a wider, miner-led rally in London on Wednesday after the sudden resignation of the chief executive of Thomas Cook unnerved the sector.

After Harriet Green, who drove the recovery of the tour operator from near-collapse, announced her immediate departure, shares in the company slumped 19 per cent to 111.6p and the bottom of the mid-cap FTSE 250.

    Thomas Cook also trimmed its guidance for the full year, saying it expected growth in the 12 months to September 2015 to come “at a more moderate pace”. It noted that geopolitical uncertainty was damping demand, with weakening consumer confidence in Europe also taking a toll.

    “Investor concern is that Ms Green has left too soon and that the company transformation may be at risk,” said Rebecca O’Keeffe, head of investment at Interactive Investor.

    “Comments that her ‘work was complete’ conflict with other statements in their results that there is still ‘more to do’.”

    Credit Suisse cut its rating on Thomas Cook’s stock from “outperform” to “neutral”, saying: “The outlook commentary is balanced but cautious as the company note it expects more measured [earnings] growth plus highlights winter trading and extra cost pressures . . . We lower our 2015 and 2016 earnings before interest and taxation forecasts by 10 per cent and 13 per cent [respectively]”.

    As traders read across from the news, Tui Travel was among the biggest fallers on the FTSE 100, down 0.8 per cent at 443p. EasyJet was caught in the downdraft, turning around from its recent gains which related to lower crude prices. The stock drifted 0.5 per cent to £15.52.

    Overall, the main London index rose 0.3 per cent to 6,749.06, a rise of 18 points, with the rally underpinned by resurgent base metal stocks as risk appetite continued to improve on global markets.

    London’s best single gainer was Antofagasta, up 4.2 per cent at 764p. Anglo American gained 0.7 per cent to £13.39.

    Defensive stocks were lower in line with the more confident mood. Admiral Group, the car insurer, fell 0.7 per cent to £12.14 while United Utilities slid 0.8 per cent to 907½p.