FTSE in-depth: Carnival sinks on oil price woe

By Geoff Foster for MailOnline
Updated: 03:31 EDT, 24 February 2011

As the price of Brent crude oil soared more than $5 a barrel to hit $111 for the first time since August 2008 amid growing concern about the civil unrest in Libya, shares of cruise ship operator Carnival nosedived 115p or 4.2% to 2644.5p.

Foster: Footsie bounced back when dealers heard that US consumer confidence rose.

Investors disembarked on hearing that broker Nomura had slashed its target price to 3450p from 3800p and lowered its 2011 earnings per share forecast by 8% on an expected fuel price increase.

Although analyst Nicholas Thomas remains fairly bullish on the stock he says that bunker fuel prices now stand 19pc above Carnival's full-year 2011 guidance level in December, and about 15% above his original assumption.

He estimates that every 10% change in the fuel price in either direction affects earnings per share by 7-8%.

Thomas reckons Carnival will progressively recover the pricing power that was lost in 2008-09 as a result of the recession and from the damage this caused to the booking curve.

Other travel companies were friendless on fears of what affect rising fuel prices will have on margins. TUI Travel closed 2.8p lower at 240.3p and Thomas Cook 3.9p cheaper at 190.6p.

The prospect of further rises in oil prices fanned concerns about global economic growth and prompted sporadic selling of blue chips.

An increase to three in the number of Monetary Policy Committee members who voted for a rise in UK interest rates at the last MPC meeting also prompted fears that the Bank of England could jump the gun and lift rates as early as next month.

The speculation left the Footsie 73.23 points down at 5,923.53 and the FTSE 250 130.5 points lower at 11,521.9. Wall Street lost a further 43 points in early trading.

Interest in part-nationalised UK banks Lloyds Banking Group and Royal Bank of Scotland was enlivened by Qatar prime minister Sheikh Hamad bin Jassim al Thani's comments at a press conference with Prime Minister David Cameron in the Far East that Qatar is very much open to investing in both UK banks.

Lloyds, which reports full-year results tomorrow, touched 69.5p before closing 0.79p cheaper at 65.46p, while RBS eased 0.4p to 47.31p, after 48.4p, ahead of today's annual results. AMEC rose 10p to 1138p on buying ahead of annual results due early next month and following impressive figures from Australian peer Worley Parsons.

The bullish tenor of the chairman's AGM statement lifted electrical equipment company Gooch & Housego 25p to 557.5p. Shareholders were told that trading for the first four months of the year has been ahead of management's expectations.

The group has seen strong demand continue, particularly in the industrial division, but also in aerospace and defence and life sciences. Investec raised its target price to 615p from 540p.

Media group Aegis slipped 3p to 139.45p after broker Charles Stanley Securities reiterated its sell recommendation. Aegis on Tuesday announced there would be a £25m exceptional charge for the full-year 2010.

Exclient, Nueva Rumasa, a Spanish conglomerate, has filed for insolvency protection with debts of 700m. Analyst Richard Nunn says the client agreement Aegis had in place for over 10 years raises serious concerns about how it is managing existing clients if this were to be repeated.

After warning that 2011 profitability will improve at a slower pace than originally anticipated, UK business adviser RSM Tenon plummeted 11.25p, or 21%, to 42.375p.

Interim figures also showed a higher-than-expected net debt figure of £73m. Entrepreneur and chairman Bob Morton was a big buyer on the way down, acquiring 100,000 shares at 46p and 100,000 at 44.84. Morton and family interests now hold just under 7%.

Affordable housebuilder Galliford Try erected a gain of 10p at 367.5p following robust interims.

First-half profits rose 29% to £17m and the dividend per share 36% to 4.5p. The second-half has started well and the company reports a 19% increase in reserved, contracted or completed housing sales, with sales rates since the beginning of January encouraging. Investec's target price is 433p.

Punters piled into Titanium Resources, chasing shares of the Sierra Leone miner up to 20p before they closed 4.75p better at 15.25p on turnover of 2.1m.

Broker Mirabaud Securities placed 113.6m shares at 10p a share, raising £11.4m. Funds raised will help reduce debt, improve financial flexibility and put the company on a firmer footing with the Government of Sierra Leone.

Fears that its North African operations could be affected by the civil unrest sweeping the region dragged Irish oil and gas explorer Petroceltic 1p lower to 11.5p.