Market Report: Housebuilders find their popularity on the wane

 

The housing market can hardly be said to be booming at the moment, but that hasn't stopped the housebuilders recently, in the Square Mile at least. The sector has found itself rather in favour with investors during 2011, with its stocks managing to outperform the FTSE All Share index by an average of over 20 per cent.

Yet concern is increasing that their popularity could be on the wane, as Citigroup yesterday became the latest to lower its expectations for 2012.

Citing their rather depressing forecast that UK GDP growth in the UK next year will be lower than previously hoped while unemployment will be higher, analysts from the broker reduced the number of housing sales they were expecting to take place.

They also decided to remove their "buy" recommendations on both Barratt Developments and Bovis Homes, criticising the former for being the "most financially stretched" among its peers. In response, the two – which were not helped by Rightmove revealing house prices dropped by 2.7 per cent over December – fell 3.6p to 89p and 14.6p to 423.9p respectively.

There was little cheer elsewhere in the sector, with Persimmon retreating 13.9p to 446.2p despite keeping hold of its "buy" rating. The only riser was Berkeley, and it managed to edge up 11p to 1,269p after Citi's scribblers highlighted its exposure to London and raised its price target to 1,375p.

With trading desks in the Square Mile getting emptier and emptier, the FTSE 100 suffered a choppy session. "One gets the feeling this may well be the tone to trading for the next few weeks," said City Index's Joshua Raymond, "as traders pay less and less attention to their dealing screens and more attention to their Christmas shopping lists."

A late slump left the top-tier index 22.35 points lower at 5,364.99 at the bell, with sentiment over the eurozone crisis darkened by cautious comments from the ECB's president, Mario Draghi.

Amid fears the death of Kim Jong-il may cause political instability, there was a demand for the defensive names such as Unilever (29p stronger at 2,096p) and Imperial Tobacco (30p stronger at 2,355p).

Another helped by a move away from risk was Shire, which took the top spot by advancing 40p to 2,150p as the drugs maker – on course to be the benchmark index's biggest riser over 2012 – also saw the revival yet again of vague bid speculation.

The banks were hit by the news that Sir John Vickers' proposals for the sector have been accepted by the Government. Lloyds dipped 1.04p to 23.47p while Royal Bank of Scotland shifted down 0.6p to 19.42p. Reports over the weekend claimed it was considering selling its Hoare Govett stockbroking business, coming in the wake of rumours last month casting doubt over the future of its equities desk.

The three top-tier debutantes all had a tough introduction on their first trading session as blue-chip stocks. Chelsea-owner Roman Abramovich will not have enjoyed seeing steelmaker Evraz, which he holds over a third of, being driven back 8p to 359p, while fellow Russian firm Polymetal and the Irish building materials group CRH edged down 5p to 1,035p and 5p to 1,035p respectively.

 

After reports over the weekend that Exxon Mobil has been considering a possible approach for Gulf Keystone Petroleum (GKP), the AIM-listed explorer shot up as high as 225.54p during trading. However, it closed at 177.88p – a rise of 12.75p over the session – after saying it was not currently in bid discussions.

It meant its fellow oil companies with operations in Kurdistan were also in focus, including Afren – a favourite of the market gossips. Revived takeover rumours suggested US giant Chevron as one possible bidder, and although traders were left distinctly unimpressed by the vague speculation, it still climbed 5.65p to 83.95p on the FTSE 250.

The news that Joe Lewis' Piedmont investment vehicle has increased its stake in Mitchells & Butlers to above 25 per cent saw the pubs group climb 3.8p to 233.3p. The Tottenham Hotspur-owner tried in September to buy it outright and is now able to block resolutions by other investors or the company itself.

 

Down among the small-cap groups, investors in Fortune Oil were thanking their lucky stars after the energy company shot up 13.16 per cent to 10.75p. Its joint venture South China Bluesky Aviation has signed a deal that will double the number of airports in China the plane refuelling group operates at.

Meanwhile, Yell crept up 0.03p to 5.74p as the Yellow Pages publisher managed to draw up a new deal with its lenders. The group already added 9 per cent on Friday on optimism that an agreement on its attempts to restructure its debt would be reached.

FTSE 100 Risers

* Aggreko 1,848p (up 31p, 1.71 per cent) Temporary power supplier cheers the City after slightly increasing its pre-tax profit expectations for the year from at least £320m to roughly £324m.

* Arm Holdings 555.5p (up 5p, 0.91 per cent) Cambridge-based chip designer manages to finish ahead as it becomes the subject of vague takeover speculation for the umpteenth time.

FTSE 100 Fallers

* Man Group 123.8p (down 3.8p, 2.98 per cent) World's largest listed hedge fund continues to be knocked back, with its share price having now retreated more than 15 per cent in just a fortnight.

* BT 187p (down 2.9p, 1.53 per cent) Telecoms giant finishes in the red as it announces it is suing Google in the US for alleged patent infringement over six patents. The search engine denies the claims.

FTSE 250 Risers

* Ashtead 213.5p (up 3.9p, 1.86 per cent) Equipment-hire company continues to be pushed up by the news last Friday that its US peer United Rentals is paying $2bn (£1.28bn)for RSC Holdings.

* Balfour Beatty 248.5p (up 35p, 1.43 per cent) Contractor gets a boost from announcing it has been awarded, as part of a joint venture with CLG Developments, a £414m gas contract in the Republic of Ireland.

FTSE 250 Fallers

* Ocado 59.2p (down 12p, 16.85 per cent) Online grocer takes the wooden spoon as it issues a profits warning, blaming staffing costs caused by problems at its Hatfield distribution depot.

* Shanks 92p (down 3.1p, 3.26 per cent) Waste company continues to fall after Goldman Sachs' analysts decision last week to downgrade their recommendation to "neutral" from "buy".

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