LONDON MARKETS: FTSE 100 Logs 3-day Win Streak, But Home Builders Slide After Budget
November 22 2017 - 12:21PM
Dow Jones News
By Carla Mozee and Victor Reklaitis, MarketWatch
Miners rise; Thomas Cook shares tumble on FTSE 250
British blue-chip stocks closed with gains for a third day in a
row Wednesday, as commodity shares strengthened, but home building
stocks were knocked lower after the U.K. finance minister outlined
the government's plans for the housing market.
What markets are doing: The FTSE 100 index finished up 0.1% at
7,419.02, building on Tuesday's advance of 0.3%
(http://www.marketwatch.com/story/ftse-100-edges-lower-as-brexit-hopes-buoy-pound-2017-11-21).
The midcap FTSE 250 index picked up 0.4% to close at
20,013.86.
The pound climbed to $1.3293, up from $1.3237 late Tuesday in
New York. But it had dropped to an intraday low against the dollar
after the government downgraded its British economic growth
forecasts.
The 10-year gilt yield pared its gain to less than 1 basis point
at 1.272%, according to Tradeweb.
See:How German political turmoil could hurt the pound more than
the euro
(http://www.marketwatch.com/story/heres-why-german-political-turmoil-could-hurt-sterling-more-than-the-euro-2017-11-21)
What's moving markets: Home building stocks showed the greatest
reaction to the Autumn Budget presented by Chancellor of the
Exchequer Philip Hammond. Shares in the companies were yanked down
after Hammond said the government--which has been trying to boost
the available amount of affordable homes--would launch an urgent
review of so-called landbanking.
"The idea is that house builders over many years have been
steadily buying up land at cheap prices. and they keep building at
this steady, but low, pace and that helps them keep prices high. It
sounds like a conspiracy but it's common sense, from their
perspective," said Chris Beauchamp, chief market analyst at IG, in
a telephone interview.
"The government is going to look into this now and that could go
towards compulsory purchases at lower [land] prices--that would hit
[home builders'] balance sheets," he said.
Meanwhile, the pound bounced back from an intraday low of
$1.3214. Sterling had been dragged lower as Hammond said the Office
for Budget Responsibility cut growth forecasts for the economy. GDP
this year is now expected to expand by 1.5%, down from a previous
forecast of 2%. The 2018 growth rate projection was cut to 1.4%
from 1.6%.
"Dollar weakness is coming into play, clearly a trend
reasserting itself there," and that's helped the pound, said
Beauchamp. He said sterling's also been helped by expectations that
Brexit talks may regain momentum. "That's probably taking
precedence over this one budget, which was depressing in terms of
growth forecast and productivity growth."
The Financial Times reported
(https://www.ft.com/content/525c4bd8-cede-11e7-9dbb-291a884dd8c6)
that the U.K. and the European Union are looking to agree on a
"divorce bill"--the amount the U.K. will have to pay on withdrawing
from the bloc--within three weeks.
But the budget wasn't completely gloomy, in part as duties on
fuel and alcohol and additional funds for the NHS were included,
said Beauchamp.
Housing shares: Home builder stocks struggled, with Barratt
Developments PLC (BDEV.LN) down 3.7%, Berkeley Group Holdings PLC
(BKG.LN) down 2.6%, Persimmon PLC (PSN.LN) off 1.9% and Taylor
Wimpey PLC (TW.LN) lower by 1.8%.
On the midcap FTSE 250 , Bellway PLC (BWY.LN) lost 2.5% and
Bovis Homes Group PLC (BVS.LN) gave up 2.1%.
Hammond did say that stamp duty will be abolished for first-time
buyers of homes costing up to GBP300,000. For homes purchased at a
price between GBP300,000 to GBP500,000, first-time buyers will now
pay stamp duty on the last GBP200,000.
Miners on the up: Mining shares rose as dollar-denominated
metals prices gained "amid [dollar] weakness (U.S. holiday, dovish
Yellen, tax delays), Indonesian mine-supply disruptions and hopes
that Chinese output cuts will be less than expected," said Accendo
Markets analysts early Wednesday.
Among miners, Fresnillo PLC (FRES.LN) added 4.3%, Randgold
Resources PLC (RRS.LN) moved up 1.4%, and BHP Billiton PLC (BLT.LN)
(BHP.AU) (BHP.AU) tacked on 0.7%.
Stock movers: TUI AG slipped 0.5%, coming off session lows. The
shares were hurt alongside an 8.4% slide in shares of rival Thomas
Cook Group PLC (TCG.LN) on the FTSE 250.
Thomas Cook said in its full-year 2017 earnings report that
gross margin was reduced in part because of a competitive market in
Spain. The company's fiscal pretax profit rose to GBP46 million.
(http://www.marketwatch.com/story/thomas-cook-fy-profit-rises-hikes-dividend-by-20-2017-11-22)
Shares in Royal Bank of Scotland Group PLC (RBS.LN) closed 1.4%
lower after the U.K. budget documents indicated the government will
start re-privatizing the bailed-out bank in 2019.
(END) Dow Jones Newswires
November 22, 2017 12:06 ET (17:06 GMT)
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