Markets: TUI slump drags market into the red

LONDON FTSE 100 CLOSE 5,376.41 -34.11

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

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

Worries over the Bank of England's quarterly inflation report today and last night's US Federal Reserve's policy meeting also hit the wider market, with the FTSE 100 index closing down 34.11 points to 5,376.41.

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 has previously said 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.

Sterling slipped 0.8 per cent to just under $1.58, although it held firm at €1.20.

Will Hedden, sales trader at IG Index, said: "The FTSE 100 is still more than 10 per cent above its July lows so it might be expecting too much to see additional sharp gains from current levels - this is a market that seems to be due some sort of correction."

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

The news sent rival Thomas Cook down 7 per cent 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 1,078p amid continued concerns over the slowing global economy.

Shares in engineering firm Tomkins dipped 1p to 322.4p after it emerged that Edinburgh-based Standard Life Investments (SLI), one of the company's biggest shareholders, had bought a further 1.5 million shares on Friday, taking its stake to 3.13 per cent.

SLI has branded a Canadian consortium's 2.9 billion bid for the group as "too low". Shares in Standard Life, SLI's parent group, closed up 1.2p at 216.4p ahead of today's interim results.

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 per cent owned by GDF and will be one of the world's biggest 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 worst performer, losing 103p to 2,480p.

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 per cent, up 2.4p to 13.4p.