Travel stocks hit by misery in the Mediterranean - London Report

INVESTOR sentiment was punctured by Greece’s deepening debt crisis following the breakdown of talks with creditors and Athens’ imposition of capital controls.

Travel and leisure stocks were hit hard by events in Greece, a popular holiday destination for Europeans, and news that tour companies were evacuating thousands of holidaymakers from Tunisia after a gunman killed dozens of people at a beach hotel on Friday.

The blue-chip FTSE 100 index was down 133.22 points, or two per cent at 6,620.48 points at the close.

It was pressured by a 2.2 per cent drop in UK banking index after Greece closed its banks to check the growing strains on its crippled financial system.

Greek Prime Minister Alexis Tsipras announced a referendum for 5 July to decide whether the country should accept or reject the bailout agreement offered by creditors.

“Tsipras devolving the decision to the electorate is a populist move that reduces the likelihood of a deal with Greece’s creditors and which causes the kind of uncertainty markets hate,” Lorne Baring, managing director of B Capital Wealth Management, said.

“We expect downward pressure to resume with this new twist in the Greek saga but it may be short-lived as the political pressure to resolve the situation mounts.”

Among companies evacuating tourists from Tunisia following Friday’s attack, TUI Travel shed 7.1 per cent, making it the biggest FTSE 100 faller.

The firm’s Thomson and First Choice businesses said they had around 6,400 customers across the country.

International Consolidated Airlines Group and budget airline easyJet fell 4.1 per cent and 2.1 per cent respectively.

“The whole situation is pretty awful, and the travel industry is going to be hit the most. People are being repatriated from Tunisia, there are cancellations, it all has a bad effect on travel companies,” Mark Priest, sales trader at ETX Capital, said.

“People might also be nervous about booking new holidays, so it could have a longer term impact too.”

Basic resources stocks also dropped, with the UK mining index down 0.7 per cent.