U.K. travel stocks among the big winners after Monarch collapse
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The U.K.'s stock benchmark finished higher for a fourth straight session on Monday, as a plunging pound provided a lift and travel stocks were among the big winners.
The FTSE 100 index rose 0.9% to end at 7,438.84, nabbing its highest close since Aug. 9, according to FactSet data.
The jump came as the pound recently traded at $1.3269, down from $1.3399 late Friday in New York. A weaker pound can boost the FTSE 100, as many of the index's multinational companies generate most of their sales in other currencies.
"There are a few potential reasons why sterling is flagging," said Spreadex analyst Connor Campbell in a note. He cited a larger-than-anticipated drop in a U.K. manufacturing gauge (http://www.marketwatch.com/story/growth-in-uk-manufacturing-slows-in-september-2017-10-02), along with a bigger-than-expected rise for a U.S. manufacturing index (http://www.marketwatch.com/story/key-yardstick-of-us-manufacturers-touches-highest-level-since-2004-ism-finds-2017-10-02).
"There's also concerns over the fractious Tory conference, the perception that [Prime Minister] Theresa May has lost control of her party, and what this means for the already stalling Brexit talks," Campbell added.
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Sterling also lost ground against the euro , buying EUR1.1301, compared with EUR1.1342 on Friday, even as Sunday's Catalan independence vote (http://www.marketwatch.com/story/catalonia-leader-with-90-approval-we-have-the-right-to-be-independent-2017-10-01) weighed on the shared currency.
On Friday, the London blue-chip index closed out the third quarter with a 0.8% gain (http://www.marketwatch.com/story/ftse-100-steps-higher-on-course-for-a-quarterly-rise-2017-09-29), as it also scored a 0.8% advance for the month of September.
Travel stocks: October's upbeat start for U.K. stocks was led by shares of easyJet PLC (EZJ.LN), which climbed 5.2% after rival discount carrier Monarch Airlines said it had been placed into administration (http://www.marketwatch.com/story/monarch-airlines-collapses-leaving-110000-passengers-without-flights-2017-10-02) and had canceled all flights and vacations booked through the company. U.K. media described it as Britain's biggest airline collapse ever.
"The failure of Monarch is good news for rivals," said Neil Wilson, senior market analyst at ETX Capital, in a note.
"It means fewer seats to fill sector-wide--more than 6 million in the case of Monarch. This should mean Ryanair and easyJet can comfortably improve load factors, even if the reputation of the former has suffered of late. This should be positive for margins despite pricing pressures," he added.
Ryanair Holdings PLC (RYAAY) has been in the firing line lately after canceling flights for more than 700,000 passengers due to a mess up with pilots' vacations. Shares of the Irish low-cost airline were up 3.5% on Monday.
Read:Airlines take off after Monarch collapse leaves room for rivals (http://www.marketwatch.com/story/european-airlines-take-off-after-monarch-collapse-leaves-room-for-rivals-2017-10-02)
And see:Ryanair threatened with court action after cancellation scandal (http://www.marketwatch.com/story/ryanair-threatened-with-court-action-after-cancellation-scandal-2017-09-28)
Other travel stocks in the U.K. were also higher, on hopes they will pick up the spoils of the extra bookings and potentially pick up some of Monarch's assets cheap. Shares of British Airways-parent International Consolidated Airlines Group SA (IAG.LN) (IAG.LN) gained 2.4%, InterContinental Hotels Group PLC (IHG) added 1%, and TUI AG put on 1.5%.
On the FTSE 250 index , travel operator Thomas Cook Group PLC (TCG.LN) advanced 1.2%.
(END) Dow Jones Newswires
October 02, 2017 12:15 ET (16:15 GMT)