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Market Report: Hot weather turns heat on travel trade

  • @LauraHChesters

Evidence of the damage of expensive fuel and a hot summer, that tempted holiday makers to stay at home rather than jet off abroad, was the reason for a crash in travel stocks yesterday. A profits warning from the Irish-based budget airline Ryanair further knocked the City's confidence in the sector where traders were already nervous that the holiday sector could be struggling as the fuel price rose following concerns over Syria.

Michael Hewson, a senior market analyst at CMC Markets, said: "The budget Irish carrier cited increased pricing pressures across Europe and lower traffic as a result of the recent warm weather. Higher fuel costs due to rising oil prices are also likely to be a factor while the company also downgraded its profit forecasts for the current year."

An array of travel groups hit turbulence with budget group easyJet the worst hit – down 65p to 1,215p. British Airways owner IAG was off 3.7p to 291p and the tour operators were not left unscathed. Tui Travel reversed 11.1p to 334.6p and the mid-cap holiday group Thomas Cook nosedived 6.9p to 135.7p.

Even the cruise ship operator Carnival got washed up in the worries and dipped 51p to 2,334p.

Strong figures from both China and the UK's service sectors only managed to lift the FTSE 100 6.33 points to 6,474.74 as continued uncertainty over Syria held back any larger gain.

Telecoms giant Vodafone rebounded from the previous day's fall – mainly from profit taking after it announced its mega deal to sell its US joint venture to partner Verizon. The fall was its biggest decline in more than 11 weeks but it was 4.5p better at 207p yesterday.

Oil and gas explorer BG Group spurted up 24p to 1,271p as it followed a wider rise in European oil and gas specialists.

Jefferies' analyst David Reynolds said the recent adland mega-merger of Publicis and Omnicom won't be enough to take on Sir Martin Sorrell's WPP where it counts – China.

Mr Reynolds points out that the country is the world's fastest-growing advertising market, set to be worth about $80bn (£51bn) by 2016. He said WPP has a competitive advantage there given its focus on "local account wins first, rather than localised servicing of global accounts". He rated WPP a buy. Citibank also upped its target price and it was 7p better at 1,240p.

Investec's analysts were cautiously optimistic about publisher Pearson. The group is largely unchanged in the wake of first-half results and the deconsolidation of Penguin, but Steve Liechti at the broker says new chief executive John Fallon's more aggressive approach to digital is promising and Pearson advanced 5p to 1,283p.

Miners continued their rally after strong numbers from China's construction sector. Commodity trading giant Glencore Xstrata climbed 3.15p to 315.35p.

Demand for industrial equipment from hire firm Ashtead helped it report a strong first quarter yesterday with a pre-tax profit of £97.4m. But net debt continued to grow, and stands at almost £1.2bn against £988m last year and it was 36.5p worse off at 651p – the worst performer on the mid-tier table. Scribblers at Goldman Sachs decided mobile money – paying via smartphone – is coming of age and highlighted Monitise as a winner. The Aim-listed business rose 7.75p to 53.75p.

Animation, gaming, entertainment production and distribution company DQ Entertainment produced a 1.375p gain to 19.125p after its management visited the UK and met shareholders.

The group provides 2D, 3D and CGI animation to a number of businesses such a TV channels and partners with the likes of Disney and Warner Bros. The group is also expected to announce its maiden dividend later this year.

Elsewhere on Aim, Wishbone Gold, the latest venture of entrepreneur Richard Poulden, saw shares climb after finding high-grade gold at its 4,800 hectare White Mountain project in Australia. Wishbone dug up 0.125p to 2.75p.

Prospective gold producer Bullabulling Gold ticked up 0.75p to 4.625p on the back of news of a new drilling programme at its Gibraltar property.

Leather brand Mulberry's director remuneration packages were given the go ahead at its AGM yesterday, but the company's shares were 15p weaker at 985p.