Market update

The FTSE 100 was down 108.7 points at 5949 at 12.07 pm today. The London benchmark was pulled down by oil companies and by the miners – both sectors were hurt by an easing in commodities prices. A worse than expected reading on the Chartered Institute of Purchasing and Supply’s purchasing managers index, which slid to 49.8 in May from 50.5 in April, and on the Nationwide consumer confidence index, which hit an all time of low of 69 in May, also dampened investor sentiment.

Moving up

Alliance & Leicester led the FTSE 100 – the stock was driven up reports that private equity firms were planning to use recent weakness to build stakes in the banking sector. The speculation follows Monday’s news from Bradford & Bingley, the embattled buy-to-let mortgage specialist which announced a surprise investment from Texas Pacific, the American private equity group. A&L was up 3.62 per cent or 14.5p at 414.75p.

The oil price weakness proved a boon for British Airways, which was up 3.14 per cent or 7.25p at 238p, claiming second place on the FTSE 100 leader board. FTSE 250-listed Easyjet was also firm at 300p, up 4.75p.

On the FTSE 250, rumours of a management buyout plan boosted Rentokil Initial, which gained 4.1 per cent or 4p to 101.5p and claimed second place on the mid-cap index. Traders said the rumours, which have appeared before, had been re-ignited by some heaving trading in the shares, but added that the chances of a buyout remained slim.

Takeover speculation was evident around Shaftesbury, the property group which gained 4.13 per cent or 19p to 478.75p. Paul Kemsley, the former vice chairman of Tottenham Hotspur, was said to be in bid talks with the company.

Moving down

Another day and yet another bearish broker note sullied sentiment in the house building sector. This time, it was UBS, whose analysts moved Bellway, Redrow and Persimmon to ‘sell’.

“House builders are going to have to find a clearing price for working progress in 2008 and for generating sales in 2009 to turn land into cash as land is not replaced. Given the severe lack of mortgage availability, we suspect that prices could decline by 15-20% as in previous collapse. With volume likely to be down c30% at least, sector profitability could be put under extreme pressure,” the broker said, adding:

“While the sector discount to historic tangible book may look attractive at 45% (with Barratt and Taylor Wimpey at 70%), we see no positive catalysts with risk of capital raisings coming on the agenda.”

The reference to capital raisings hit Barratt Developments – the company was rumoured to be mulling an emergency rights issue last month. Its stock was the worst off in the sector and lost 6.39 per cent or 10p to 146.5p. Barratt is now down more than 65 per cent since the start of the year.

Bovis Homes lost 21.75p to 389.25p, Taylor Wimpey was down 3.75p at 78.5p, Bellway lost 18p to 585p and Redrow was down 13.25p at 210p.

Persimmon, which is expected to fall out of the FTSE 100 in the upcoming index reshuffle, lost 10.75p to 445.25p.

In the mining sector, the Eurasian Natural Resources remained low – in addition to the weakness in commodities prices, the company was dogged by suggestions that Kazakhmys, which owns 14.6 per cent of the company, was gearing up to sell out of its compatriot. ENRC lost 5.93 per cent or 81p to 1286p, claiming first place on the FTSE 100 loser board.

A number of ex-dividend stocks also weighed on the FTSE 100 – among them, Vodafone was down 4.85 per cent or 7.9p at 154.85p, National Grid lost 4.07 per cent or 30.5p to 718p and Enterprise Inns was down 2.72 per cent or 12.5p at 447.25p.