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."

Start your day with The Independent, sign up for daily news emails
Sport
England's women celebrate after their 3rd place play-off win against Germany
Women's World CupFara Williams converts penalty to secure victory and bronze medals
Arts and Entertainment
Ricardo by Edward Sutcliffe, 2014
artPortraits of LA cricketers from notorious suburb go on display
News
newsHillary Clinton comments on viral Humans of New York photo of gay teenager
Arts and Entertainment
The gang rape scene in the Royal Opera’s production of Gioachino Rossini’s Guillaume Tell has caused huge controversy
music
ebooks
ebooksAn introduction to the ground rules of British democracy
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

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'