Market Report: Bellway builds on rise in house prices

Recovery hopes lured the bulls into the housing sector yesterday, with Bellway rising by more than six per cent in the London market's final session of the decade.

The housebuilder saw its shares rise to 818p, up 48p, while Bovis Homes rallied by 5.5 per cent, or 22.8p, to 434.7p, after the Nationwide said that house prices had risen for their eighth consecutive month in December. The fact that the 0.4 per cent gain was the smallest since April did little to dampen the enthusiasm, with Persimmon gaining 2.7 per cent, or 12.4p, to 469.5p and Barratt Developments advancing to 124p, up 2.5 per cent, or 3p. In the wider sector, Taylor Wimpey was 1.8 per cent, or 0.7p, stronger at 38.9p. Berkeley was weak, however, easing by 1.6 per cent, or 13.5p, to 820p.

Commercial property stocks were also on a firm footing. Encouraged by recent signs of stability in the real estate market, traders have been warming to the sector, which led the FTSE 100 yesterday. Land Securities was the strongest of the blue chips, registering a 4.3 per cent, or 28p, rise to 685p, while Hammerson, which claimed second place, closed four per cent, or 16.2p, stronger at 424p. British Land, which recently bought Segro's stake in two shopping centres, was 3.3 per cent, or 15.1p, ahead at 480p, and Liberty International rose to 515p, up 2.8 per cent, or 14p. Segro was 1.6p firmer at 344.6p.

Overall, the FTSE 100 swung back beyond the 5400-point mark, rising by 15.02 points to 5412.88, while the mid-cap FTSE 250 index was broadly unchanged, edging lower by 0.16 points to 9306.89. The benchmark is up 22 per cent over 2009, its best performance since 1997, and a sharp reversal from 2008, when the blue chips slumped by 31 per cent to their worst 12 months on record.

In fact, equities have done well internationally. The MSCI all-country stock index, for instance, was up around half a per cent on the day as the London market came to a close, putting it on track for it best annual performance since its inception in 1998. The index remains well off its all-time high, which was struck in October 2007, before the financial crisis hit.

Insurance issues, which have been attracting interest on hopes of consolidation activity in the new year, were strong, with Standard Life rallying by 3.5 per cent or 7.3p to 216.5p. Legal & General, which is often mentioned as a possible target for the financial services tycoon Clive Cowdery's Resolution vehicle, was also strong, gaining 3.5 per cent, or 2.75p, to 80.6p, while Prudential gained 9.5p to 640p and Aviva rose by 3.5p to 397.9p.

Over in the banking sector, Lloyds Banking Group was 0.85p stronger at 50.69p, while Barclays rose by 3.75p to 276p. Standard Chartered was 18p ahead at 1575p, while the Royal Bank of Scotland was 0.12p heavier at 29.2p. Yesterday's gains notwithstanding, RBS has endured a rough year, with the stock going down as the worst-performing blue chip of 2009, according to Bloomberg Data.

Elsewhere, the miners firmed, with metals prices continuing to advance in response to the weakness in the US dollar and hopes of an uptick in industrial demand over the next 12 months. Copper prices, for instance, touched a 16-month high in the final hours of trading on the stock market on Thursday. The gains cheered Antofagasta, the Chilean copper miner, which rose by 17.5p to 992p yesterday. The Mexican silver miner Fresnillo was 14p ahead at 792p, while Lonmin, the platinum producer, was 18p stronger at 1959p.

Among retailers, the supermarket group J Sainsbury was 4.7p ahead at 323.5p, while Tesco was 5p higher at 428p. Next, the high-street fashion retailer, was 15p stronger at 2083p. Marks & Spencer, which alongside Sainsbury's and Next is among those that are due to update the market next week, was 1p higher at 402p.

Defensive issues in the utilities sector were out of favour yesterday, with United Utilities falling to 495.7p, down 1.5 per cent, or 7.3p; Pennon easing by 3.5p to 537.5p; Severn Trent declining by 7p to 1086p was also weak; and Centrica losing 0.8p to 281.1p. BT, down 1.6 per cent, or 2.2p, at 135p, Compass, down 1.6 per cent, or 7p, at 445.2p, and Sage, down a per cent, or 2.1p, at 220p, were also among the laggards.

Further afield, Dana Petroleum was 13p weaker 1176p, with parts of the wider sector also easing amid profit taking. The fallback came as oil prices rallied towards the $80 per barrel level, rounding off their best 12 months in a decade. Besides the weakness in the US dollar, recent gains have been supported by US Energy Information Administration data showing declines in oil inventories.

Looking ahead to 2010, oil prices are expected to remain firm, as the recovery takes root in the world economy. Barclays Capital said it expects the new year to be one of "transition between the demand concerns of 2009 and the supply concerns of 2011, with... geopolitical developments having a heightened importance".

Of the blue-chip oil stocks, the majors were behind, with BG and BP easing by 0.5p to 1122p and by 1.4p to 600p respectively. In the exploration and production sector, Tullow Oil was 8p ahead at 1305p and Cairn Energy gained 1.5p to 332.6p.

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