Market Report: Mortgage reprieve lays base for housebuilders

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The Independent Online

The housebuilders were among the stocks enjoying a much-needed rally yesterday, as fears that it is about to become harder to get a mortgage were dismissed.

Despite the eurozone debt crisis, HSBC said that a major fall in mortgage availability was "a low-probability event" because of the current relative strength of the UK banks' balance sheets.

In what traders described as a "turning point" given the broker's traditional bearishness on the sector, its analysts gave all of the housebuilders an "overweight" rating, saying their recent performance assumed a drop in both the price and number of new-build houses that was overly pessimistic.

Instead, the scribblers increased their earnings forecasts, claiming margins were about to get a major boost from the sector taking advantage of recent cheap land prices.

In response, Barratt Developments was driven up 9.13 per cent to 79.5p while Persimmon was lifted 22p to 462p. The analysts singled out Bovis and Taylor Wimpey for special praise thanks to the duo's exposure to the south of the country, and they jumped up 8.5p to 411.4p and 1.86p to 35.86p respectively.

After the benchmark index closed on Tuesday at its lowest level for 15 months following a five-day losing streak, investors were finally in the mood yesterday for some bargain hunting. Shrugging off the revision of GDP for the second quarter down to just 0.1 per cent, the FTSE 100 rallied back above the 5,000 point level, closing 157.73 points ahead at 5,102.17.

The IMF's supportive comments about Greece helped balance out Moody's decision to cut Italy's credit rating by two levels, while rising hopes of a plan to recapitalise the region's banks also boosted sentiment over the state of the eurozone. As a result, Barclays powered up 11.1p to 155.45p while Royal Bank of Scotland moved 1.08p higher to 22.6p.

The miners were also recovering after Goldman Sachs said a number of stocks in the sector – including BHP Billiton, up 111p to 1,778p, and Anglo American, up 92.5p to 2,231p – had been so badly hit they were already pricing in the worst-case scenario for commodity prices.

The latter was also the subject of speculation it could be interested in a move for the Australian coal digger New Hope Corp, which said yesterday it was inviting a number of companies to made a bid for it after receiving numerous approaches.

The bounce in the City prompted gossips to revive a couple of familiar tales, including vague chatter linking Arm Holdings for the umpteenth time with a possible bid from Intel. The chip designer touched a high of 560p, before easing back a bit to 552p – an advance over the session of 13.5p.

Analysts were also digesting the unveiling late on Tuesday of Apple's latest iPhone, which will still use Arm's technology. Merchant Securities' Julian Tolley said the handset was "expanding the potential market" for the Cambridge-based group, adding that he sees it "as the high liquidity home for investors seeking exposure to the technology sector".

Ferrexpo was another helped by all the reheated takeover speculation: a large surge saw the iron ore producer take the top ranking on the mid-tier index. With a possible price of 450p a share being suggested, Brazil's Vale was once again among the names being discussed as a potential predator for the group, which charged up 28.1p to 266.8p.

In what proved to be a dramatic day for the High Street, Mothercare and SuperGroup were involved in a race to the bottom of the FTSE 250. The two chains plummeted 41.94 per cent to 180p and 29.65 per cent to 707p respectively after both released nasty profit warnings.

Heritage Oil was helped by encouraging oil tests from the same structure in Kurdistan where the explorer made a gas find in January that prompted its shares to slump 30 per cent. This time the explorer spurted up 10.1p to 227.8p, despite Libya's National Oil Company saying no deal over oil from the country had been struck. Heritage revealed on Tuesday it had taken control of the Libyan oil services firm Sahara Oil.

Its peer Premier Oil crept down 2.8p to 335.9p after revealing it had agreed to buy EnCore Oil in a £221m deal. The Alternative Investment Market-listed explorer was catapulted forwards 63.54 per cent to 74p on the news, with some in the City speculating that another rival bid could still emerge.

Meanwhile, attention switched to which of the other North Sea-focused companies could attract an admirer, as Nautical Petroleum and Xcite Energy shot up 37p to 295p and 10p to 119.5p, respectively.

Confirmation that it may restructure a major debt facility saw Bumi slip 29.5p to 710.5p, extending the Nathaniel Rothschild-founded miner's fall to nearly 16 per cent over the past two sessions.