MARKET REPORT: Housebuilders harm as consumers look forward to price cuts

Housebuilders led the FTSE 100 fallers yesterday after Berkeley warned that a ‘lack of urgency’ in the housing market was likely to continue until interest rates begin to fall.

Higher rates have caused potential buyers to hesitate as they wait for borrowing costs to fall.

Shares in Berkeley fell 6.3 per cent, or 316p, to 4694p as the FTSE 100 made steady gains, climbing 0.2 per cent, or 13.82 points, to 8205.11.

The FTSE 250, meanwhile, slid 0.1 per cent, or 28.88 points, to 20381.05.

Market woes: Housebuilder Berkeley, which focuses on developments in London and south east England, reported an 8% fall in pre-tax profits to £557m

Other housebuilders were also dragged down. Persimmon dropped 2.8 per cent, or 39.5p, to 1365p, Taylor Wimpey fell 2.5 per cent, or 3.65p, to 143.75p and Barratt tumbled 2.7 per cent, or 13.2p, to 468.7p.

Berkeley, which focuses on developments in London and south-east England, reported an 8 per cent fall in pre-tax profits to £557million. 

The builder said there were ‘signs that the outlook is improving’ but chief executive Rob Perrins warned that ‘the current lack of urgency in the market is likely to remain until the long-anticipated reduction in interest rates commences’.

The housebuilders were also reacting to inflation figures which have further dampened hopes of a summer rate cut.

Also among the blue-chip losers yesterday was AstraZeneca. The pharma giant fell for a second day, dropping 0.6 per cent, or 76p, to 12340p, following the disclosure that a breast cancer drug combination had failed trials.

Stock Watch – Arrow Exploration 

Shares in oil and gas business Arrow Exploration soared after an optimistic update about one of its Colombian projects.

The AIM-listed company said production from its first horizontal well Carrizales Norte prospect in eastern Colombia had exceeded expectations.

The business said the technology proven by this well boded well for further projects in the same area. Shares increased 15 per cent, or 3p, to 23p.

Smurfit Kappa led the blue-chip index, increasing by 4.8 per cent, or 172p, to 3750p. The packaging business has been buoyed ahead of its merger next month with Atlanta-based West Rock.

The boost came as it was confirmed the merged company will be included in the S&P Dow Jones indices in the US.

Rival DS Smith was also up, climbing 0.5 per cent, or 1.6p, to 352p.

Airline stocks were boosted by the fall in headline inflation.

‘This could potentially give families more financial wiggle room to spend on booking seats for a spot in the sun,’ Susannah Streeter, head of money and markets at investment platform Hargreaves Lansdown said.

‘It’s more encouraging for airlines as there have been signs of consumers starting to baulk at higher ticket prices.’ British Airways owner IAG rose 1.2 per cent, or 2p, to 170.05p and EasyJet nudged up 0.7 per cent, or 3p, to 455.1p.

Royal carpet maker Victoria bounced after its auditors gave it a clean bill of health. Last year they had flagged concerns over a subsidiary, citing worries over money laundering rules. Shares climbed 2.1 per cent, or 3.6p, to 175.6p.

Vodafone edged higher as it continues to help clear the way for its proposed merger with Three. It sold a bigger than anticipated stake of 18 per cent in Indian telecommunications firm, Indus Towers. It now holds a 3.1 per cent stake.

This will raise £1.4billion, which Vodafone will mostly use to pay down its £1.5billion debt pile relating to its Indian assets. Shares climbed 1.4 per cent, or 1p, to 71.64p. 

The watchdog is probing its £15billion merger with Three, owned by Hong Kong group CK Hutchison.