FTSE Close: RBS, TUI Travel down; GlaxoSmithKline up

By Adrian Lowery
Updated: 12:11 EDT, 10 August 2010

17.00 TUI Travel led London's blue chip share index into the red today as stocks suffered in cautious trading ahead of key forecasts from UK and US central banks.

The Thomson Holidays owner slumped 10% as it revealed consumer nerves triggered a 2% fall in UK bookings in the past three months.

Worries over the US Federal Reserve's policy meeting later today and the Bank of England's quarterly inflation report tomorrow also hit the wider market, with the FTSE 100 Index closing down 34.1 points to 5376.4.

America's Dow Jones Industrial Average and the tech-laden Nasdaq were both down around 1% soon after Wall Street opened.

Asian markets had earlier reacted to a big drop in China's July imports - a sign that the rapid expansion in the world's third largest economy is cooling - denting mining stocks.

But concerns focused on the Fed's statement and prospects for the world's biggest economy after chairman Ben Bernanke said a few weeks ago that the recovery's pace was "unusually uncertain".

News revealing the UK trade deficit narrowed slightly in June failed to help the pound ahead of the Bank of England's report tomorrow.

Sterling slipped 0.8% to just under $1.58, although it held firm at 1.20 euros.

Among stocks, TUI was 22.5p lower at 203.1p as the travel giant said it had more cheap holidays to give away - squeezing profits - as the World Cup and sunny weather also gave the firm headaches.

The news sent rival Thomas Cook down 7% or 14.6p to 183.9p in the FTSE 250.

TUI was joined on the way down by InterContinental Hotels, even though the Holiday Inn operator posted profits at the top end of hopes. Shares fell 46p to 1078p amid continued concerns over the slowing global economy.

International Power, which owns UK assets including the giant coal-fired station at Rugeley in Staffordshire, was another faller, down 7.4p to 372.6p after confirming its merger with French giant GDF Suez.

The new company will be 70% owned by GDF under the deal to create one of the world's biggest independent power generators.

A host of heavyweight fallers in the mining sector also hindered progress amid worries over commodity demand following the slowdown in Chinese import growth. Vedanta Resources was the sector's worst performer, losing 103p to 2480p.

Elsewhere, social housing firm Connaught clawed back some of its mammoth recent falls over the impact of spending cuts, warnings of huge losses and a possible debt for equity swap.

The stock saw a much-needed gain of 22%, up 2.4p to 13.4p.

Shares in bakery chain Greggs went stale with an 11.6p fall to 421.9p after saying the recent rise in wheat prices could squeeze margins, although customers are unlikely to see significant price hikes.

The biggest Footsie risers were GlaxoSmithKline up 25p at 1177p, Smiths Group up 24p to 1148p, Shire ahead 27p to 1498p and AstraZeneca up 43p at 3348p.

The biggest Footsie fallers were TUI Travel down 22.5p to 203.1p, InterContinental Hotels off 46p to 1078p, Vedanta Resources down 103p to 2480p and Carnival down 91p to 2226p.

15.00: On Wall Street, the Dow Jones Industrial Average opened lower. After the early exchamnges, it now sits 117.62 lower at 10,581.13.

That knocked shares in London, where the FTSE 100 has dropped further tand currently sits 53.02 down at 5357.50.

12.30 A host of heavyweight fallers in the mining sector has hindered progress for the Footsie amid worries over commodity demand following the slowdown in Chinese import growth.

Xstrata and Antofagasta were the sector's worst performers, losing 28p to 1057p and 25p to 1022p respectively.

The FTSE 100 index was 18.3 points lower at 5,392.2.

In the FTSE 250, social housing firm Connaught was the biggest riser, although the 4% or 0.5p rise to 11.5p came after devastating falls for the stock on worries over the impact of spending cuts, warnings of huge losses and a possible debt for equity swap.

Shares in bakery chain Greggs went stale with a 13.8p fall to 419.7p after saying that the recent rise in wheat prices could squeeze margins, although customers are unlikely to see significant price hikes.

09.30

Evidence that China's economy has started to slow down and a profits warning from TUI Travel dragged the London market lower today.

The FTSE 100 index, which climbed 1.5% on Monday, fell 30.7 points to 5,379.6 after Asian markets reacted to a big drop in China's July imports - a sign that the rapid expansion in the world's third largest economy is cooling.

'These markets are characterised by ranges rather than trends. In range-bound markets investors have to go back to looking at capital preservation and total returns,' said Jeremy Batstone-Carr, head of research at Charles Stanley.

'Investors quite clearly are looking to adopt a more defensive posture towards equities.'

Banks had a bad morning with Royal Bank of Scotland down 1.35p lower to 49p after Credit Suisse downgraded its rating 'neutral' from 'outperform' following recent results.

Oil explorer Cairn Energy put on 15.3p to 476.3p after the Daily Mail market report cited talk that a cash-rich oil giant has knocked on chief executive Sir Bill Gammell's door at the group's Edinburgh headquarters with a 'friendly' takeover proposal that values the oil and gas explorer at £9.8bn, or £7-plus a share.

Meanwhile, International Power dipped 15p to 365p after GDF Suez, Europe's second biggest utility, announced it was offering the British company's shareholders a cash sweetener of 92p per share in an agreed tie-up that will create the world's largest independent power producer in terms of revenue.

International Power also posted first-half results with profit from operations of £524m ($836.6m), down from £555m last year.

Thomson Holidays owner TUI Travel dived 9% - 21p to 204.6p - after issuing a profits warning.

UK bookings have fallen 2% since its last update in May and the firm now has more holidays to give away in the 'lates' market, squeezing profits. Thomas Cook, which is due to post a trading update tomorrow, fell 12p to 186.5p.

The pair were joined on the way down by InterContinental Hotels, even though the Holiday Inn operator posted profits at the top end of hopes. Shares fell 60p to 1064p amid continued concerns over the slowing global economy and after BofA Merrill Lynch repeated its 'underperform' recommendation, citing nervousness over macro economic conditions.

Elsewhere, there were some less-than-encouraging signs on the state of the British economy, where house prices fell last month and retail sales growth slowed abruptly according to two surveys on Tuesday that will raise concern the recovery is losing momentum.

Across the Atlantic, the Federal Reserve is expected to send a clear signal later today that it is prepared to print more money to support a faltering economic recovery if necessary.

The central bank is widely expected to renew its vow to keep rates near zero for 'an extended period' and markets will watch closely for signs officials are growing more concerned the recovery is at risk.

'There are concerns ... with the Fed likely to downgrade its expectations for growth if not formally then at least raise concerns about the durability of economic growth,' said Charles Stanley's Batstone-Carr.