Market Report: Travel firms provide an escape from the gloom

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The Independent Online

While the rest of the market frets about the spectre of a significant slowdown in economic activity, travel companies (especially those in the package holiday business) are celebrating bumper results.

Why? (Or rather, how?) Well, according to Thomas Cook Group's chief executive, Manny Fontenla-Novoa, British consumers tend to go on holiday regardless of the economic season. His company reported better-than-expected full-year results yesterday, a day after rival TUI Travel issued a bullish update on Tuesday, noting that "consumer demand for holidays remains strong across all our source markets, in particular the UK, where consumer sentiment towards leisure travel remains positive, with trading unaffected to date by the softening in demand experienced in other sectors".

Both stocks closed up – TUI gained third place on the FTSE 100 leader board, up 3.33 per cent at 248p while Thomas Cook was up 3p to 263p.

Elsewhere, Shire, the pharmaceuticals group, was hurt after analysts at Goldman Sachs cut their recommendation on the stock to "neutral" from "buy". Goldman's said that, following a survey of physicians who treat ADHD, it no longer anticipated increases in prescriptions for the company's Vyvanse ADHD medication. The downgrade depressed the stock by 36p, or almost 4 per cent, to 899p.

AstraZeneca, another drug company which is due to publish its full-year results today, was also down, losing 60p, or 2.75 per cent, to 2120p.

There was merger talk in the mining sector again as the market wondered aloud about BHP Billiton and Rio Tinto. BHP faces a "put-up or shut-up" deadline on 6 February, to either formalise or abandon its offer for the rival company. Some reports claimed that the Chinese were building a stake in Rio, to stave off a takeover, while others said that BHP, whose board reportedly met to discuss the deadline yesterday, may be able to afford a 4.25-for-one offer. The speculation sent Rio to fourth place in the list of the FTSE 100's best performers yesterday as its shares closed up 3.17 per cent at 248.25p. BHP, on the other hand, was less successful and closed down 3p at 1446p.

In other parts of the sector, South African miners had a bright day as the lights came on at their plants in the country. Both Anglo American, which has a number of active projects in the country, and International Ferro Metals, the Australian ferrochrome producer which runs furnaces in the country's North West province, said that Eskom, the state electricity provider, had restored 80 per cent of the required power supply to their production facilities. And the two companies should have 90 per cent of the electricity they need the end of this week. The news helped Anglo to maintain its place among the FTSE 100's best-performing stocks for the second consecutive day, closing up 2.19 per cent, or 57p, at 2665p.

Elsewhere, on the FTSE 250, International Ferro climbed 6.71 per cent to 87.50p, claiming third place on the leader board.

Also on the FTSE 250, Mitchells & Butlers, which spent most of the day on a downward slope as Tuesday's speculation, that the company had been approached by both private equity and trade suitors, began to evaporate, shot to the top of the table just before close. A late statement from the company – it appeared on the London Stock Exchange's regulatory news service at 4.18pm – confirmed the rumours, noting that "a number of parties have now made preliminary and tentative expressions of interest in the company to Citi", its adviser. Although the company did not name any suitors, both Punch Taverns and Robert Tchenguiz, who increased his stake in the group to 22 per cent the other day, were touted as possible birds of prey after the company folded a hedging position at a £274m loss on Tuesday. M&B's stock surged by almost 18 per cent or 72p to 473p after the statement was issued. Punch Taverns also closed up, gaining almost 5 per cent or 33.50p to end the day at 709.50p.

Autonomy continued its rally, closing up 4.14 per cent at 943.00. Brokers at Panmure Gordon eased the path by raising their price target for the company's stock to 1022p from 1019p.

On AIM, the coal miner Caledon Resources saw its share price rise by 11.30 per cent or 3.25p to 32p after it announced the commencement of commercial production from its Magatar mining system at its Cook coal mine in Queensland, Australia. Shares in Cape Lambert Iron Ore also rose, gaining 8.62 per cent to 15.75p, after the company revised the resource estimate at its Cape Lambert iron ore project in Australia.

Also on AIM, TurfTrax, the horse race data provider, made its debut yesterday. The company placed 8 million shares at 40p; by close, the stock was up by 0.50p to 40.50p.

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