TUI’s golden opportunity and Metro Bank shares sink (again) on bond failure

"Trade talks and the UK parliament were the focus for investors on Tuesday. European shares strengthened on chatter that US/China trade talks would soon be back on the agenda," says Russ Mould, Investment Director at AJ Bell.

"UK stocks also moved ahead as the market waited for the Supreme Court’s decision on the suspension of parliament. Sterling nudged higher ahead of the news with investors bidding up consumer staples and drug companies.

"Oil prices retreated with a 0.9% drop in Brent Crude to $64.24 per barrel while gold prices jumped 1% to $1,519 per ounce."

TUI

"Life has been hard for TUI in recent years with the company suffering from certain aircraft being grounded, overcapacity in the airline sector and the impact of Brexit uncertainty on consumer spending.

"Travel operator Thomas Cook going bust is therefore Christmas come early as far as TUI is concerned as it removes a major player from the sector.

"TUI’s trading update is somewhat restrained in celebrating the demise of its competitor, with the company knowing it would be insensitive to cheer the misfortune of its rival.

"In fact, TUI is likely to face some extra costs repatriating customers who were booked on Thomas Cook flights. It has also had to cancel some holidays scheduled for the coming weeks where customers were due to fly with Thomas Cook’s airline, meaning it will lose some revenue.

"But short-term pains will almost certainly turn into long-term gains for TUI. It has a chance to mop up business that would have normally gone to Thomas Cook and to potentially convince some of its rival’s customers to go for some of its more differentiated offerings rather than a bog-standard package holiday.

"For example, current trading shows how its holiday experiences continue to be the strong part of the business, such as husky sleigh tours in Lapland or a trip to Ferrari Land in Spain.

"There is a major chance for TUI to accelerate earnings but it will require some very smart marketing."

Metro Bank

"The cancellation of a £200 million bond sale is another major blow to Metro Bank, leaving management with red faces and the shares sinking even further.

"Failure to get enough support for a product that is yielding 7.5% is quite remarkable when you consider how investors are struggling to find generous levels of income in the current market.

"It suggests that investors don’t trust the bank or they believe the 7.5% yield is simply not high enough to compensate for the risks of owning such a product.

"Metro Bank has lost all credibility with the market after accounting issues earlier this year and a regulatory investigation. The failure of the bond sale adds another negative factor to its bow."

These articles are for information purposes only and are not a personal recommendation or advice.