Market Report: Taylor Wimpey falls to lowest since 1990s recession

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The Independent Online

Taylor Wimpey sunk to its lowest level since the recessionary times of the early 1990s yesterday after a new report from the Nationwide Building Society highlighted the sorry state of the housing market.

The Nationwide House Price index fell by 2.5 per cent in May, the largest single-month fall in its history; almost £5,000 was wiped off the average price of a home, which went down from £178,555 in April to £173,583 in May.

Panmure Gordon said: "With no immediate relief in the credit crisis, prices are likely to remain in negative territory in the coming months.

"We believe housebuilders will continue to find market conditions very difficult throughout 2008 and 2009. Transaction levels continue to be depressed, mortgage approvals are significantly lower and confidence is poor."

Spooked investors soon sold out and a number of housebuilders fell to record lows. Taylor Wimpey was the worst off – the stock ended at first place on the FTSE 250 loser board, down 8.56 per cent or 8p at 85.5p.

And there were 52-week lows for Bovis Homes, down 19p at 429p, Barratt Developments, which lost 10.5p to 190p, Berkeley, 16p weaker at 824p, and the FTSE 100-listed Persimmon, which fell 26p to 487.5p.

Redrow, however, bucked the trend. Like its peers, the housebuilder spent most of the day in the red. But close to the end of play, speculation of further stake building by the activist hedge fund Toscafund took Redrow up 6.25p to 238p.

Overall, the FTSE 100 managed to avoid a big loss, slipping a mere 1.5 points to 6,068.1, after resource stocks registered gains as commodities prices recovered. Eurasian Natural Resources Corporation fared the best among mining companies, gaining 71p to 1,481p and claiming second place on the London benchmark.

Cairn Energy, at third place, led the charge of the oil companies, adding 104p to 3,419p.

Xstrata was up 24p at 4,040p and Rio Tinto gained 43p to 6,180p. Tullow Oil was up 24.5p at 922p and BP added 7p to 612.5p.

Mortgage lenders were hit by the housing market news. HBOS lost 16.75p to 414.25p and was second only to Persimmon on the FTSE 100 loser board. Alliance & Leicester was down 1.5p at 420.25p and Barclays lost 9.75p to 377.5p.

The FTSE 250-listed Bradford & Bingley was down 6.75p at 90.5p. In addition to the news from Nationwide, B&B was hit by continuing concern about its recent cash call. Market sources cited renewed speculation that the rights issue, which is fully underwritten, may not be taken up by enough shareholders.

On the FTSE 100, the hedge fund group Man swung to first place on the leader board, gaining 30.5p to 619p, after posting forecast-beating results. The company also said that deputy chairman Stanley Fink, who led the group as chief executive from 2000 to 2007, will retire in July.

Land Securities, the UK's largest real estate investment trust, was down 20p at 1,416p after Citigroup, whose analysts forecast a further 17 per cent fall in NAV this year, reduced its target price for the stock to 1,600p from 1,700p. "Our valuation is based on long-term forecasts and we like the company on fundamentals, but real estate shares are trading on short-term sentiment. The shares are at risk of falling in the short term," the broker said.

Citi also expressed its scepticism about the Trillium demerger. "Even a near-term sale of Trillium seems sub-optimal, given the lack of capital available to a purchaser: we would not want to see a sub-prime price accepted," the broker said.

On the FTSE 250, which was up 40.9 at 10,098.2, Yell came off the speculative rally path as investors appeared to abandon hopes of a bid from Microsoft and instead focused on comments by Exane BNP Paribas.

The broker lowered its target price for the stock by more than half, to 160p from 330p, and highlighted concerns about the directory group's debt.

"Our analysis shows Yell is likely to breach its loan covenants in 2009/10 and that it faces possible default in May 2011 (when it is required to repay a significant loan)," Exane said, adding that asset sales are likely as part of covenant renegotiations with debt holders. Yell closed flat at 130p.

Carpetright rose as news emerged that Bill Gates, the billionaire co-founder of Microsoft, had picked up a 3 per cent stake. Mr. Gates was reported to have bought the interest via his Cascade Investment vehicle. Carpetright put on 12.5p to 793.5p.

On AIM, the online gaming group Sportingbet was down 7.1 per cent or 2.75p at 36p after news emerged that two of its employees had been detained on vacation by Turkish authorities, who are also holding a number of people linked to Superbahis, its Turkish business. The company said that it had received no formal clarifications on the matter from the Turkish authorities.

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