Barratt Developments, the FTSE 250-listed house-builder recently besieged by renewed rights issue rumours, hit a 52-week low yesterday after a pair of brokers spooked investors in the sector.
Panmure Gordon said that the market was "clearly concerned about [Barratt's] financial position and possible asset writedowns, rights issues or dividend cuts" and downgraded its 2009 and 2010 profit forecasts for the company.
The damage was exacerbated by a note from Dresdner Kleinwort, entitled "April was the cruellest month (so far)". "Housebuilders' sales reservations have collapsed by almost two-thirds [year-on-year] during the critical Spring selling season, according to confidential industry figures we have seen, prices are sliding, land values are down at least 40 per cent and company announcements have highlighted the perilous state of the market," the broker said, sparking a sell-off across the sector.
Barratt hit a low of 257.50p before recovering to 269.75p, down 6.5p, by close. Taylor Wimpey was down 3.25p at 125.50p, Persimmon lost 14.50p to 565p and Bellway was weaker by 12p at 690.50p.
Overall the FTSE 100 closed flat at 6,087.30. Weakness among retailers, housing sector stocks and disappointing earnings news from the likes of Smith & Nephew, which lost 85p to 570p, pulled down the London benchmark even as miners displayed strength and Wall Street registered early gains as investors looked beyond disappointing profits from Exxon Mobil. The FTSE 250 was down, losing 49.30 points to 10,073.
Mining stocks returned to form and rallied as metals prices recovered. The sector was also boosted by consolidation hopes: the Eurasian Natural Resources Corporation acquired 50 per cent of Brazil's Bahia Mineracao Limitada for $300m (£152m) and, elsewhere, Xstrata's chief executive, Mick Davis, speaking at a British Swiss Chamber of Commerce event in Zurich on Wednesday, said that he had "no issue with Xstrata being bought by another company". By close, Xstrata was up 114p to 4,060p, claiming sixth place on the FTSE 100 leader board. ENRC lost 40p to 1,160p. Kazakhmys was up 33p at 1,615p, while Anglo American advanced by 65p to 3,334p.
On the FTSE 100, B&Q-owner Kingfisher was weak after Goldman Sachs revised its rating on the stock from "sell" from "neutral". "In our view, Kingfisher's premium to the other UK retailers on a multiples basis is unwarranted – we believe that UK DIY spending is unlikely to recover (as evidenced by comments from Home Retail Group that trading at Homebase has begun the year weaker than expected) and that French DIY spending is coming under significant pressure," the broker said. It added: "Kingfisher's decision to avoid any significant disposals concerns us, given the groups highly levered balance sheet." Kingfisher lost 1.80p to 131p. Home Retail Group was also weak, down 7.25p at 256.75p.
British Airways, which earlier confirmed "co-operation" discussions with American Airlines and Continental Airlines, gained 7.28 per cent or 16.50p to 243p as the market speculated about the trio's possible plans to apply for antitrust immunity. "Antitrust immunity would create significant revenue and cost benefits and strengthen the product offering," said Panmure Gordon. "This would be good news for BA, although it might still need to give up slots at [Heathrow Airport]."
BG was up at fourth place on the leader board, gaining 29p to 1,260, even as market chatter anticipated the emergence of a rival offer to challenge its bid for Australia's Origin Energy. Last night's chatter suggested that the rival bidder was an Indian company or possibly another Australian energy company.
The speculators continued to drive Carphone Warehouse, which rose by 3.25p to 275p. Hopes of a takeover by Best Buy, or of a division of the business between the American company and Vodafone, continued to draw investors. Vodafone was down 1 at 159.3p.
On the FTSE 250, property services specialist Mitie gained 5.5p to 236.75p after Panmure Gordon revised its rating on the stock to "buy" from "sell". "After a weak share price performance and with solid earnings expectations we see an attractive opportunity to buy Mitie ahead of its [full-year] results on 19 May," the broker said.
Rank rose by 5.75p to 94.75p as investors grew hopeful of fresh government measures to help the industry following the Sports minister, Gerry Sutcliffe, appearing at the Bingo Association's annual meeting.
The oil services group Hunting was buoyant, rising by 6p to 896p, following renewed bid speculation.
On AIM, Chromex Mining advanced by 8.70 per cent or 3p to 37.50p after unveiling a series of board and management changes, which it said would help it advance its projects in South Africa.
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