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London open: Stocks flat but TUI surges after Thomas Cook collapse
London stocks were steady in early trade on Monday amid renewed concerns about Sino-US trade relations, although holiday firm TUI racked up strong gains as rival Thomas Cook collapsed.
At 0840 BST, the FTSE 100 was flat at 7,347.91, while the pound was down 0.2% against the dollar at 1.2458 and unchanged versus the euro at 1.1322 ahead of a Supreme Court decision this week – possibly as early as Monday – on whether Prime Minister Boris Johnson acted legally in proroguing Parliament.
Investors were also mulling the latest trade developments between the US and China. CMC Markets analyst Michael Hewson pointed to the fact that US stocks closed lower on Friday.
“The reason for the late falls was renewed concerns over progress on US-China trade after Chinese officials abruptly cancelled a trip to Montana and Nebraska for talks over farming, though the failure to overcome the previous peaks in July may well have also prompted some end of week profit taking,” he said.
As far as the Supreme Court ruling is concerned, he said it would be a surprise if the judges were to find against the government, but even if they were to do so it’s not immediately apparent what difference it would make to whether the UK and EU are able to agree deal.
“Nonetheless a decision against the government could prompt a significant amount of sterling volatility, as investors weigh up what any government response might be,” he said.
In equity markets, TUI was the standout gainer, up more than 8% as former rival Thomas Cook finally went bust after last-minute talks to save the industry giant failed, leaving thousands of holidaymakers stranded around the world and putting 22,000 jobs at risk. Airlines were also on the rise, with British Airways parent IAG, EasyJet and Ryanair all trading up.
Neil Wilson, chief market analyst at Markets.com, said: “There’s plenty of factors in its demise, mainly too much debt. But ultimately the debt was the symptom of the ailment – Thomas Cook failed because it didn’t move with the times.
“The effects will be felt across the sector, not all bad. On The Beach sees a one off hit from helping customers make alternative arrangements and from list margin on cancelled bookings. Meanwhile airlines are firmer today as they should feel the benefit from the abrupt loss of short haul capacity.”
AstraZeneca gained ground after the pharmaceuticals giant received European Union marketing authorisation for its Qtrilmet diabetes treatment.
On the downside, Ocado fell following a report over the weekend that the company is suing former co-founder Jonathan Fairman as it reckons he obtained confidential documents to set up a rival venture.
High Street retailer Marks and Spencer was in the red as it said chief financial officer Humphrey Singer had decided to leave the company. No departure date had been set and Singer would work with chief executive Steve Rowe to ensure an orderly transition, the company said in a statement.
Sports Direct ticked a touch lower after offering to buy football pitch operator Goals Soccer Centres, in which it already holds a near 19% stake, for £4m.
