Market Report: Redrow rallies as 'double dip' fears ease

Housing sector stocks bounced back last night, with Redrow rebounding by almost 7 per cent after the bulls moved in on the view that the market was disproportionately discounting the possibility of "double dip" in house prices.

Citigroup said sector shares prices had factored in a full "double dip", with the market discounting the possibility of prices tumbling after rising steadily in recent months. For its part, the broker said it did not foresee such a scenario unless the supply of houses and/or the cost of mortgages deteriorates unexpectedly. Indeed, for average prices to be down over the next twelve months, "the year end price would need to fall by close to 10 per cent from the starting point", making 2010 the second worst year on record after 2008.

"The last six months has been a strange period for... house-building shares. Newsflow on a day-to-day trading basis has consistently improved, while share prices have headed in the opposite direction, especially in the last 3-4 months," Citi said, adding that the lack of both new and second-hand sellers should mean that supply remains tight in coming months. "As a result, we see house prices edging ahead, albeit at a much slower pace than in the last 6 months," the broker added. "However, we expect prices across the country for 2010 to be around 7 per cent up on 2009 levels."

In keeping with its assessment, the broker moved Barratt Developments, Taylor Wimpey and Redrow to "buy", boosting their share prices by 6 per cent or 6.6p to 116p, 4.9 per cent or 1.67p to 35.6p and 8.5p to 131p respectively. "Redrow has recently seen the return of the well-respected former chief executive and company founder Steve Morgan," Citi said. "[It] lost its way when he left the company by changing its product mix and investing in non-core businesses."

Overall, the FTSE 100 gained 34.49 points to 5320.26, while the FTSE 250 rose by 114.48 points to 9141.35 amid relief at the latest UK unemployment figures, with the Office for National Statistics saying that the quarterly rise in unemployment in the three months to October was the smallest since spring 2008. The news boosted recovery hopes, although Howard Archer, chief UK economist at the forecasters IHS Global Insight, warned that youth unemployment remained a "major concern".

On the FTSE 100, the banking sector was firm, with Lloyds rising by 0.23p to 55.58p, Barclays edging up by 7.45p to 292p, HSBC rising by 7.2p to 709p and Standard Chartered, which was in focus as it emerged that Peter Sands had sold 50,000 shares in the bank, adding 15.5p to 1577.5p following reports that European regulators were planning a long grace period to allow banks to adjust to new capital adequacy rules.

Royal Bank of Scotland also gained ground, advancing by 0.22p to 31.85p, after the group said it was conducting an investigation after uncovering "potential irregularities" in its small and medium enterprise unit in China. RBS was also the focus of some comment from Citigroup, which expressed worries about politicisation of the bank.

Also on the downside, Diageo, the drinks giant, was under pressure, declining by 8p to 1057p after Deutsche Bank moved the stock to "hold" on valuation grounds. The broker said that while it still expected the company to outperform the wider sector, the stock had reached its 1050p target price. The downgrade offset the impact of some support from UBS, which revised its recommendation on Diageo to "buy".

On the upside, the speculators were once again busy touting the possibility of a 125p per share bid for the life insurer Legal & General, which was 1.3 per cent or 1.05p ahead at 80.25p. The wider sector was also firm, with RSA Insurance gaining 4p to 119.7p, Prudential gaining 17p to 626.5p and Standard Life rising by 3.1p to 212.2p.

Elsewhere, parts of the pubs sector suffered following an uninspiring update from Punch Taverns, which fell by 3.85p to 77.3p. KBC Peel Hunt, which switched its stance on Punch to "sell" from "hold", said there was little positive news on trading, though managed margins are stabilising and debt reduction continues. The read-across was especially hard to bear for Marston's, which declined by more than 6 per cent or 6p to 89.7p. Enterprise Inns was 2.15p weaker at 98.65p. Mitchells & Butlers was firm, rising by 0.5p to 259.2p, after Joe Lewis's Piedmont investment vehicle asked for John Lovering, Michael Balfour, Jeremy Blood and Simon Burke to be appointed as directors.

Back on the upside, and Premier Foods rose by 6.6 per cent or 2.18p to 35.12p after the analysts at UBS weighed in, revising their recommendation on food producer's stock to "buy" from "neutral", albeit with a revised 41p target price, compared to 43p previously. "The stock has fallen 25 per cent over the last 3 months, despite management continuing to indicate they are comfortable with consensus full-year estimates," the broker said, adding: "We believe the valuation has fallen to a level where it will start to attract interest from value investors."

PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
Taste the difference: Nell Frizzell tucks into a fry-up in Jesse's cafe in east London
food + drinkHow a bike accident left one woman living in a distorted world in which spices smell of old socks and muesli tastes like pork fat
Sport
Luke Shaw’s performance in the derby will be key to how his Manchester United side get on
footballIt's not a game to lose, writes Paul Scholes
Arts and Entertainment
Don’t send in the clowns: masks and make-up conceal true facial expressions, thwarting our instinct to read people’s minds through their faces, as seen in ‘It’
filmThis Halloween, we ask what makes Ouija boards, demon dolls, and evil clowns so frightening?
News
peopleFarage challenges 'liberally biased' comedians to 'call him a narcissist'
Arts and Entertainment
Liam and Zayn of One Direction play with a chimpanzee on the set of their new video for 'Steal My Girl'
music
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Finance Assistant - Part time - 9 month FTC

£20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...

Marketing Manager

£40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...

Market Risk Manager - Investment Banking - Mandarin Speaker

£45,000 - £65,000: Saxton Leigh: Our client is a well-known APAC Corporate and...

Compensation and Benefits Manager - Brentwood - Circa £60,000

£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

Day In a Page

The drugs revolution starts now as MPs agree its high time for change

The drugs revolution starts now as MPs agree its high time for change

Commons debate highlights growing cross-party consensus on softening UK drugs legislation, unchanged for 43 years
The camera is turned on tabloid editors in Richard Peppiatt's 'One Rogue Reporter'

Gotcha! The camera is turned on tabloid editors

Hugh Grant says Richard Peppiatt's 'One Rogue Reporter' documentary will highlight issues raised by Leveson
Fall of the Berlin Wall: It was thanks to Mikhail Gorbachev that this symbol of division fell

Fall of the Berlin Wall

It was thanks to Gorbachev that this symbol of division fell
Halloween 2014: What makes Ouija boards, demon dolls, and evil clowns so frightening?

What makes ouija boards and demon dolls scary?

Ouija boards, demon dolls, evil children and clowns are all classic tropes of horror, and this year’s Halloween releases feature them all. What makes them so frightening, decade after decade?
A safari in modern Britain: Rose Rouse reveals how her four-year tour of Harlesden taught her as much about the UK as it did about NW10

Rose Rouse's safari in modern Britain

Rouse decided to walk and talk with as many different people as possible in her neighbourhood of Harlesden and her experiences have been published in a new book
Welcome to my world of no smell and odd tastes: How a bike accident left one woman living with unwanted food mash-ups

'My world of no smell and odd tastes'

A head injury from a bicycle accident had the surprising effect of robbing Nell Frizzell of two of her senses

Matt Parker is proud of his square roots

The "stand-up mathematician" is using comedy nights to preach maths to big audiences
Paul Scholes column: Beating Manchester City is vital part of life at Manchester United. This is first major test for Luke Shaw, Angel Di Maria and Radamel Falcao – it’s not a game to lose

Paul Scholes column

Beating City is vital part of life at United. This is first major test for Shaw, Di Maria and Falcao – it’s not a game to lose
Frank Warren: Call me an old git, but I just can't see that there's a place for women’s boxing

Frank Warren column

Call me an old git, but I just can't see that there's a place for women’s boxing
Adrian Heath interview: Former Everton striker prepares his Orlando City side for the MLS - and having Kaka in the dressing room

Adrian Heath's American dream...

Former Everton striker prepares his Orlando City side for the MLS - and having Kaka in the dressing room
Simon Hart: Manchester City will rise again but they need to change their attitude

Manchester City will rise again but they need to change their attitude

Manuel Pellegrini’s side are too good to fail and derby allows them to start again, says Simon Hart
Isis in Syria: A general reveals the lack of communication with the US - and his country's awkward relationship with their allies-by-default

A Syrian general speaks

A senior officer of Bashar al-Assad’s regime talks to Robert Fisk about his army’s brutal struggle with Isis, in a dirty war whose challenges include widespread atrocities
‘A bit of a shock...’ Cambridge economist with Glasgow roots becomes Zambia’s acting President

‘A bit of a shock...’ Economist with Glasgow roots becomes Zambia’s acting President

Guy Scott's predecessor, Michael Sata, died in a London hospital this week after a lengthy illness
Fall of the Berlin Wall: History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War

Fall of the Berlin Wall

History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War
How to turn your mobile phone into easy money

Turn your mobile phone into easy money

There are 90 million unused mobiles in the UK, which would be worth £7bn if we cashed them in, says David Crookes