Carnival, the world’s largest cruise ship operater, is heading for choppy waters and bilious investors seem increasingly to be heading for the life rafts.
Ahead of its trading update today, concerns are growing that a possible “swine flu” pandemic will hit bookings harder than the owner of P&O Cruises had previously indicated.
Already beset by rising crude oil prices, Carnival shed another 38p to £15.19, making a loss of 15 per cent in the three weeks since it talked down the impact of flu.
The sell-off accelerated this week after it emerged that five crew of its Zaandam cruise ship, part of its Holland America fleet, were diagnosed with the virus in an Alaskan port, shortly after a seven-day cruise to Seattle. All five were isolated in their cabins, treated and recovered. The worry for some investors is that holidaymakers will be put off booking.
Carnival said last month, after a travel ban to Mexico was lifted, that it expected second-quarter earnings would be only lightly dented by the fact that it had to divert some cruises temporarily from Mexico. The World Health Organisation yesterday raised the flu pandemic threat level by a notch but insisted that banning travel was not appropriate.
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Morgan Stanley this week cut its price target on Carnival to account for rising fuel prices, which are nearly half of Carnival’s costs, but insisted the shares were still undervalued.
The FTSE 100 closed up 25.12 at 4,461.87, helped by rising financial stocks as confident investors bet that Britain’s recession was nearing an end, if it not already over. Barclays was the best performer, up 16p at 304½p, helped by talk of an imminent deal for its BGI division. Royal Bank of Scotland added 1.8p to 39.7p and Lloyds Banking Group rose 1.7p to 66.7p.
Invensys, the railway signalling engineer, rose 12½p to 241½p as Goldman Sachs, in a bullish note on the whole sector, raised it from “neutral” to “buy” and its price target from 185p to 325p. It also lifted its target on Cookson, which gained 16p to 296p, on the basis that its trading statement on August 4 would confirm that it expects to meet its bank covenants at the full year and that demand from electronics and steelmaking customers was improving.
Rising crude prices weighed on British Airways, off 2.6p at 143p, but failed to help oil groups, as BP’s warning that long-term demand for oil would fall and never recover triggered profit-taking. BP slid 8¾p to 524¼p and Shell lost 28p to £16.97.
Heritage Oil underperformed the sector, down another 16p at 524p, after Iraq’s oil minister reiterated that independent contracts with outside companies and the Kurdish authorities were illegal. Investors are also concerned that both Heritage and Genel Enerji, its future merger partner, are short of ready money.
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Bankers to David Ross, Carphone Warehouse co-founder, were said to be selling down his stake in that company, which lost 3p to 168p, and in Big Yellow Group, down 25p to 313p. Shaftesbury lost 8¾p to 300p after Laxey Partners’ stake was sold.
— New York: Shares slipped from the top of a rise that had been aided by higher commodity prices and improving labour market conditions. The Dow Jones industrial average closed up 31.90 points at 8,770.92.