Terror takes toll on tourism shares
After the appalling terrorist attacks in Paris over the weekend, it seems churlish to talk about stock markets. But the human tragedy was foremost in the minds of many investors yesterday.
the eerily empty bars and streets of Paris spell bad news for the local economy.
It is also a clear sign that the french capital’s tourism industry will be hit – in the short term at least.
fears of another attack are likely to put a considerable number of people off booking that last minute trip to Paris over the festive period.
thomson holidays-owner TUI was the biggest faller in the ftSe 100, dropping 4.06pc or 46p to 1088p.
It was joined at the foot of the table by British Airways and Iberia Airlines-owner International Consolidated Airlines Group (down 16.5p to 576p) and cruise operator Carnival (falling 88p to 3383p).
Investors in InterContinental Hotels Group were also nervous about a fall in bookings, with shares off 48p at 2461p.
By the early afternoon, ¤2.5bn had been wiped off the combined value of europe’s largest tourism firms, with Air France down almost 7pc, french hotels group Accor off almost 5pc, and ftSe 250 listed The Restaurant Group, down 3.4pc, or 22.5p, to 638.5p.
But experts said those with money tied up in tourist companies should not be too worried as the impact of terrorist attacks on stock markets tends to be short lived unless another one quickly follows suit.
Peter Dixon, an economist at Commerzbank, said: ‘I don’t want to say that we have got used to these things, but the markets have learnt to realise that the attacks tend to have very limited impact on the economy and markets.
‘Sectors like travel and leisure are going to take a hit as people re-plan their travel needs, but it’s an out-of–the-season period and not happening at the top of the peak season. It may not have as much of an impact on earnings as you anticipate.’
Mike van Dulken, head of research at Accendo Markets, was also bullish and said shares in tourism companies have actually fallen from recent highs, demonstrating the sector’s resilience following the recent egyptian plane disaster, the June beach attacks in tunisia and the Charlie Hebdo killings in Paris earlier this year.
He said: ‘While this latest event is an unpleasant reminder of the threats of the 21st century, we can’t help but salute the sector’s resilience and ability to recover, mirroring that of the great cities that have unfortunately been targeted over the last 15 years.’ Overall stock markets held their nerve, with the FTSE 100 up 28.10 points to 6146.38, the french CAC down just 3.64 to 4804.31, and the German Dax up 4.83 to 10,713.23. Wall Street was also up, with the Dow Jones rising 237.77 points to 17.483.01.
Predictably gold prices edged up, rising 1pc to $1094.5 an ounce.
the precious metal is seen as a haven and investors tend to pile in during testing and uncertain times.
talking about uncertainty. Alarm bells have been sounded from various quarters about a painful correction in the housing market.
experts at Swiss bank UBS warned last month that house prices in London are the most overvalued in the world and at risk of falling.
And former business minister Vince Cable warned at the weekend – if anyone is still listening – that ‘severe economic storms’ are on their way, citing concerns about excessive household debt and inflated house prices.
But amid all the doom mongering, an upbeat statement from housebuilder Taylor Wimpey pushed its shares up towards the top of the ftSe 100 leaderboard, following a largely weak November so far. Coming on the day that online estate agents rightmove announced an overall fall in month-on-month house prices by 1.3pc, taylor Wimpey’s said that business is booming, amid rising wages and employment for the homebuilders.
Analysts at Peel Hunt were impressed and raised their recommendation on the stock from ‘hold’ to ‘add’. Shares rose 4.1pc or 7.1p to 180.9p.
Some experts believe conditions are ripe for housebuilders. Broker Jefferies reckons the UK housing market is ‘chronically and structurally undersupplied’ – in other words, not enough houses are being built.
Coupled with the Government’s Help to Buy scheme which is boosting demand, Jefferies believes UK housebuilders will prosper – whatever Vince Cable says.
Imperial Tobacco wheezed up 135p to 3589p as Goldman Sachs confirmed its ‘buy’ recommendation. A report of analysts’ views sent to clients and investors showed ten of them rate it a ‘buy’, three a ‘sell’ and five as a ‘hold’.