Market Report: Thomas Cook plunges on 'zero growth' warning

Raised fears over the state of the package-holiday industry prompted Thomas Cook to plummet towards the bottom of the mid-tier index yesterday, at one point reaching its lowest level since 2008.

Touching 164.5p near the start of the session, the travel group eventually closed at 167p – a retreat of 2.4p – as traders pointed to a "brutal" downgrade from Goldman Sachs. The broker turned dramatically bearish on the company, changing its "buy" advice to "sell" and slashing its price target by 80p to 150p.

As well as noting the numerous difficulties that have faced the travel sector in recent months, including the political unrest in North Africa and the Middle East, Goldman's analysts said the package-holiday business was "a zero-growth sector", pointing out that the number of such trips being taken by consumers in the UK has seen a steady decline over the past few years.

The analysts also warned "increasing online penetration will lead to lower barriers to entry and greater price transparency", adding that this will increase the pressure on its margins.

Thomas Cook is heavily reliant on package holidays, which accounted for nearly three-quarters of its sales in 2010. Tui Travel has an even larger exposure of 84 per cent, but Goldmans kept its "neutral" rating on the blue-chip group, and it eased back just 0.6p to 231.8p.

Overall, the FTSE 100 managed a positive response to Tuesday's large fall, shooting up 45.97 points to 6,010.44 after it lost 88.97 points the session before. The banks played their part, and Barclays was the sector's top performer with an uptick of 4.7p to 308.85p following impressive results from the US giant JP Morgan.

Another helped on the read-across was Arm Holdings, 38p ahead at 598p, in the wake of forecast-beating figures from its Dutch peer ASML. The market was also impressed by previews of Microsoft's Internet Explorer 10, which uses the chip maker's technology.

"Bears... argue that Windows on Arm could be late and/or unstable, which appears not to be the case," Morgan Stanley said. The broker added it was "positively surprised that... development is already well advanced".

The miners failed to see a major recovery from Tuesday's sell-off, with Xstrata just 3p higher at 1,468.5p and Antofagasta dipping 5p to 1,406p.

Elsewhere in the sector, Fresnillo stayed at 1,576p as it announced its silver production for the first quarter fell just over 2 per cent. It did receive support, however, from Numis Securities, which said the group was its "preferred play" among the silver miners, although the broker advised investors to switch into gold.

It is not every day brokers respond to entertainment gossip, but in the case of The X Factor and ITV it seems like analysts are keeping a close eye on the burning question of who will be in the judges' chairs at the start of the next series. Recent reports have suggested that Simon Cowell could only appear in the final, which was enough to prompt Nomura to examine the situation.

Its analysts pointed to the current series of American Idol, which is Cowell-less for the first time, saying that it "has not suffered as much as had been expected from his absence". They therefore decided the news was not enough for them to change ITV's "buy" rating, and the broadcaster edged forwards 0.05p to 75.35p.

JD Sports was out of shape on the FTSE 250, sliding 64p to 837.5p, despite beating expectations with its final results. But the damage was done by the tone of the high street chain's outlook statement, with the group warning it was "extremely cautious" over the problems facing trading.

Elsewhere in the retail sector, SuperGroup powered up 70p to 1,432p as its peer Asos finished a huge 243p better off at 1,950p on the Alternative Investment Market (AIM). The clothing website made the move after revealing its international sales in the first three months of the year recorded a 144 per cent year-on-year increase.

Back on the mid-tier index, WS Atkins was driven up to the summit, rising 38.5p to 727p, following a brief-but-positive trading statement. The engineer was bullish on its upcoming full-year results, saying it expected its figures to come in ahead of forecasts thanks particularly to the strength of its Middle East operations.

However, Cookson finished near the other end after Goldman Sachs took it off its "conviction buy list". The engineering group was knocked back 8p to 652.5p as the broker made the move because of an increase in raw-material costs, saying its earnings will be negatively affected in the short-term as a result.

A second profit warning in not much more than a week meant Alterian retreated 57.5p to 108p, with the small-cap software group saying there would be yet another update next Monday.

Meanwhile on AIM, Aureus Mining – the gold producer which has been spun out of African Aura Mining – enjoyed a positive first day of trading, adding 7.5p to close at 115p by the bell.

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Recruitment Genius: Experienced Financial Advisers and Paraplanners

Negotiable: Recruitment Genius: This extremely successful and well-established...

Guru Careers: FX Trader / Risk Manager

Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

Day In a Page

How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map
Lionel, Patti, Burt and The Who rock Glasto

Lionel, Patti, Burt and The Who rock Glasto

This was the year of 24-carat Golden Oldies
Paris Fashion Week

Paris Fashion Week

Thom Browne's scarecrows offer a rare beacon in commercial offerings
A year of the caliphate:

Isis, a year of the caliphate

Who can defeat the so-called 'Islamic State' – and how?
Marks and Spencer: Can a new team of designers put the spark back into the high-street brand?

Marks and Spencer

Can a new team of designers put the spark back into the high-street brand?
'We haven't invaded France': Italy's Prime Minister 'reclaims' Europe's highest peak

'We haven't invaded France'

Italy's Prime Minister 'reclaims' Europe's highest peak
Isis in Kobani: Why we ignore the worst of the massacres

Why do we ignore the worst of the massacres?

The West’s determination not to offend its Sunni allies helps Isis and puts us all at risk, says Patrick Cockburn
7/7 bombings 10 years on: Four emergency workers who saved lives recall the shocking day that 52 people were killed

Remembering 7/7 ten years on

Four emergency workers recall their memories of that day – and reveal how it's affected them ever since
Humans: Are the scientists developing robots in danger of replicating the hit Channel 4 drama?

They’re here to help

We want robots to do our drudge work, and to look enough like us for comfort. But are the scientists developing artificial intelligence in danger of replicating the TV drama Humans?
Time to lay these myths about the Deep South to rest

Time to lay these myths about the Deep South to rest

'Heritage' is a loaded word in the Dixie, but the Charleston killings show how dangerous it is to cling to a deadly past, says Rupert Cornwell
What exactly does 'one' mean? Court of Appeal passes judgement on thorny mathematical issue

What exactly does 'one' mean?

Court of Appeal passes judgement on thorny mathematical issue