Housing stocks drew interest last night, with Bellway firming on the view that, notwithstanding the risk of further house price falls, there were still gains to be made in the sector.
Goldman Sachs triggered the strength, telling clients that housing stocks continued to offer an average of upside of 28 per cent, even after factoring in a cautious outlook for the short term. The broker expects house prices to ease by 5 per cent by the end of this year, but it does not forecast any further declines for 2011 and 2012, arguing that "monetary and fiscal policies are likely to remain accommodative, limiting the number of 'forced sellers' in the market".
Bellway, which has been the weakest of the house builders covered by Goldman analysts, and which gained 19p to 585.5p last night, was well placed to trade up as transaction volumes recover in the coming 12 to 24 months, the broker said. Goldman was also positive on Taylor Wimpey, which edged up by 0.11p to 29.3p, and Berkeley, which was lower, easing by 10.5p to 826.5p. The broker was less keen on Barratt Developments, which closed at 102.1p, down 1p.
"We believe Barratt is most exposed to the risk of land writedowns in the event of a house price decline in excess of 5 per cent," the broker explained, moving the stock to "neutral". Barratt's valuation, however, weighed against adopting a more bearish view, Goldman said, revising its target price for the stock to 128p, compared to 190p previously.
Overall, the London market endured a volatile session, with the FTSE 100 rallying to an intra-day high above the 5,600 before closing at 5,508.45, down 31.69 points. The FTSE 250 was also unsettled, going from a high of 10,555.77 to 10,440.98, down 1.14 points, by the close.
The swings were down to worries about a possible deepening of Ireland's sovereign debt woes, with early rumours suggesting that the Irish government would need assistance from the IMF. The chatter, which was said to have sprung from a recent analyst note, was denied by a spokesman for the country's finance ministry, helping the market pare losses in the final hours of play, though the impact was partly offset by some disappointing data on US consumer sentiment.
The misplaced rumours about Ireland reminded investors of the fragile state of government finances across the Western world, dampening the mood around financial stocks. Barclays was the weakest of the lenders, shedding more than 3 per cent, or 10.1p, to close at 304.65p, while Royal Bank of Scotland fell 0.6p to 47.84p. Lloyds was down 0.98p at 75.34p, while HSBC fell 2.7p to 672.7p.
The temporary power provider Aggreko, in contrast, rallied 63p to 1,613p after Credit Suisse said that the combination of structural growth in emerging markets and a cyclical uptick in mature economies could help the company achieve a compounded annual growth rate of 19 per cent in the three years to 2012. Though coloured by a hint of caution – Credit Suisse said the valuation was full and initiated coverage with a "neutral" stance – the assessment was enough to drive Aggreko's shares to pole position on the FTSE 100.
Elsewhere, Hargreaves Lansdown added 4.2p to 461.5p, after Citigroup upped the stock to "buy" in a review of the UK asset management sector. The broker said Hargreaves was well placed to make gains after the implementation of the FSA's Retail Distribution Review, the long-awaited reform of the way retail investment advice is provided and paid for.
"We expect retail investors to prefer lower-cost, non-advised distribution channels, and HL is the only exclusively direct-to-retail platform," Citigroup said.
Further afield, Dana Petroleum was in focus, putting on 3p to 1,790p as the Korea National Oil Corporation (Knoc) took another step towards fulfilling its hostile bid to acquire the company. Knoc, which in August said it had secured non-biding letters of intent from 49 per cent of Dana shareholders, bought 29.5 per cent of the oil prospector at the 1,800p per share price of its declared final offer.
On a more speculative track, the price comparison website Moneysupermarket.com saw its shares swell more than 10 per cent at one point amid rumours of bid interest from private equity groups. The speculation, dismissed by many as nothing more than idle Friday afternoon chatter, remained vague, bearing no clues about the identity of the suitor or the likely offer price, and eventually wore off, leaving the stock 0.45p lower at 83.5p at the end of the day.
The energy efficiency specialist Eaga, which was among the stocks excluded from the FTSE 250 after the close last night, jumped to 115.4p, up 8p, following on from some reassuring Government comments on plans to alleviate fuel poverty.
Analysts at Execution Noble said that recent comments from the Secretary of State for Energy and Climate Change, Chris Huhne, chimed with its view that the Government was likely to stick with the Eaga-administered Warm Front fuel poverty scheme after the upcoming spending review.