Market Report: Housebuilders rocked by fears of slowdown

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The Independent Online

Property stocks took a beating across the board yesterday as market nerves about the sub-prime sector and fears about the housing market returned to the fore.

Reports in recent days from the Nationwide Building Society and Hometrack have predicted a slowdown in the housing market. Barratt Developments, the housebuilder which said last week that five interest rate rises and the credit crunch had led to a tightening of the housing market, was the biggest blue-chip faller yesterday, dropping 27.5p, or nearly 6 per cent, to 465p.

Other property stocks and real estate investment trusts were down as well, as the market expressed nervousness about both residential and commercial property. British Land closed the day 42.5p down, at 860p. Liberty International bruised more, closing down 53p, at 1046p, and Land Securities Group was down 68p at 1460p.

A rally among blue-chip miners, led by Xstrata, failed to prop up the FTSE 100, which ended down 81.6 at 6,180.5. Xstrata, which is close to completing its agreed takeover of Australia's Jubilee Mines, closed at 3063p, up 45p.

Vedanta Resources, the Indian copper mining group, also rose, up 20p, to 2,056p. As noted here, there was some speculation on Friday that a Chinese investor may make a bid at up to 2,700p per share. It would mean a lot of money for Anil Agarwal, who has a 51 per cent stake in the business. On the other hand, he does not appear to be looking for an exit and some traders believe its strength is just on the back of the boom in commodities.

Rio Tinto was also the focus of Chinese whispers. Traders are still expecting BHP Billiton to return with a higher offer, but Tom Albanese, the miner's chief executive who laid out the company's case for rem-aining a standalone player yesterday, poured cold water on reports that the miner has been in talks with potential counterbidders.

Chinese sources also played down talk that the Government could respond to worries over Rio-BHP Billiton's combined market share by backing a rival bid, while the Brazilian miner CVRD ruled itself out of the frame. Rio's shares closed down 83p at 5,232p.

The nervous market was also unkind to the big banks as traders anticipated bad news in the trading statements due this week. Barclays closed down 13.5p, at 497p and HSBC, which said it was marking $35bn to bail out the Cullinan Finance and Asscher Finance, was down by 15.5p, to 811.5p.

UBS cut its target price on Lloyds TSB stock, to 440p from 520p, hitting the bank's share price, which closed down 14.75p at 455.5p.

Among the mid-caps, Regal Petroleum, Frank Timis's oil and gas group which was in the news last week for, first, a deal with Shell and, second, a surprise management shake-up that saw the introduction of Shell veterans to its board, had a bad day as concerns were aired about its ability to raise funding for its Ukrainian gas projects. In a blow, Shell has withdrawn from the agreement to purchase a 51 per cent stake in Regal's Ukrainian assets.

A terse statement from the Anglo-Dutch oil major hinted at a disagreement: "The management change of 22 November at Regal was not expected by Shell, and we see from the new management's comments that they may have changed their thinking on this transaction." The swift goodbye pushed the stock down by a little more than 11p, closing at 128.25p.

Biffa, the waste management company also took a hit after confirming that it had rejected a big offer by a consortium of two private equity houses, Montagu Private Equity and Hg Pooled Management. The stock fell 33.5p, closing at 291.5p.

Reports that Emap's business-to-business unit may be costlier for bidders than previously thought sent its shares tumbling 18p to 846.5p. According to some estimates, bidders may be hit by as much as £100m in costs – more than double the £40m Emap is quoted as saying.

British Airways shares had a negative reception on the market after the company announced it will not exercise its pre-emption rights to acquire more stock in the Spanish carrier Iberia.

BA, which has a 9.95 per cent stake in the other airline, said Iberia would remain a key partner. Shares in the British airline fell by 16p over the course of the day, closing at 329.75p.

And finally, Energem Resources, the energy and biofuels company, began trading on AIM yesterday, with the shares closing at 15p. The company focuses mainly on the African energy sector, concentrating on refined oil and biofuel product distribution, sales, storage and infrastructure development and trading and logistics in sub-Saharan Africa.