Morning Note

Thomas Cook collapses, rivals gain

Morning Note

Thomas Cook has collapsed. Shares are worthless. A great, great pity. One wonders how culpable the banks who at the last gap tried to squeeze TC for another £200m are in this collapse. Could the refinancing have worked? We’ll never know for sure. For certain Fosun wasn’t prepared to pay a penny more. 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.

TC has requested that its ordinary shares be suspended from listing on the premium segment of the Official List of the FCA and from trading on the main market of the London Stock Exchange with immediate effect.


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. IAG, Ryanair and EasyJet shares were all trading higher to different degrees. TUI, TC’s main competitor, is up over 6% on the open.

US markets finished the week on a downbeat note. The S&P 500 closed half a percent lower on Friday after Chinese officials cancelled a planned visit to US farms. The sparked fresh worries over trade. However following this over the weekend we were told trade talks between the US and China were ‘constructive’ and ‘productive’. High level talks resume next month. The US has removed tariffs on around 400 Chinese imports at the request of American businesses. The narrative is being spun and we could certainly get more positive language – lots of noise around this.

SPX finished the week sub 3000 at 2,992. Could get interesting around 2970. European markets are mixed at the start of the week with the FTSE 100 pushing a little higher whilst the DAX and CAC slip. Asia has been softer with shares in China and Hong Kong down, with thinner volumes seen amid a Japanese holiday.

Aramco – sources saying it could take months to fix the damaged facilities. That’s forced oil back up. WTI crude was up at $58.70 at send time. Not

Geopolitical concerns are likely to be top of mind this week as the 74th General Assembly of the UN gets underway. Expect Iran to be at the top of the agenda for the US. Possible headline risk for oil.

Plenty more on tap this week: 

The Brexit saga continues with the expected ruling from the Supreme Court on whether the PM was correct to prorogue Parliament. If the court finds against Boris Johnson it would be yet another blow, but ultimately it’s hard to see now exactly the effect of recalling MPs for another couple of weeks. The talking shop has had over 3 years and failed to agree anything. 

Sterling will though be sensitive to headline risk. The fundamentals are that if something is perceived to reduce the risk of a no-deal Brexit it’s good for the pound and, vice versa, anything thought to increase the chances of a no-deal are negative for the pound. GBPUSD is holding around the 1.12550 region for the time being.

Following the ECB interest rate cut, markets are shifting to eco data to show whether there’s any sign of uplift in the Eurozone economy. Flash manufacturing and services PMIs are due shortly. Overall we know the EZ economy is suffering and is getting more stimulus. EURUSD remains above 1.10 for the moment.


Meanwhile we will also have a batch of Fed speakers this week to help further map out the expected path of US monetary policy over the coming months. John Williams (NY), Charles Evans (Chicago) and James Bullard (St Louis) are all in action. The dots show no more cuts this year or next – markets will watch carefully for signals from the speakers about whether that’s to be relied upon. As we said after the latest Fed decision, the message from Jay Powell seemed to be to ignore the dots.Gold has bounced off key support and looks set up for throwing off the consolidation range. Having tested levels at $1480 last week the metal is back up at the $1515. Geopolitical tensions and trade uncertainty may help, but we ultimately need to see lower sovereign yields and negative real US yields for gold to maintain its momentum.

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