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
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Syria civil war: Meet the military commander who says his soldiers will not rest until every inch of their war torn country is free of Islamist 'terrorists'

‘We won’t stop until Syria is back to normal’

Near the front lines with Islamist-controlled towns where Assad’s troops were besieged just last month, Robert Fisk meets a commander confidently preparing his soldiers for battle
The inside story of how Bill Clinton built a $2bn global foundation may undermine Hillary's chances

The inside story of how Bill Clinton built a $2bn global foundation...

... and how it may undermine Hillary's chances in 2016
12 best olive oils

Extra-virgin, cold-press, early-harvest, ultra-premium: 12 best olive oils

Choosing an olive oil is a surprising minefield. Save yourself the hassle with our handy guide
Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back