Stock prices in London opened mixed on Monday, as less-than-stellar house price data and a profit warning from midcap-listed Crest Nicholson exacerbated the strain on housebuilders.
The FTSE 100 index opened up 8.50 points, 0.1%, at 7,270.93. The FTSE 250 was down 53.00 points, 0.3%, at 18,043.60, and the AIM All-Share was down 1.46 points, 0.2%, at 730.78.
The Cboe UK 100 was up 0.1% at 725.05, the Cboe UK 250 was down 0.5% at 15,829.24, and the Cboe Small Companies was up 0.1% at 13,489.45.
In the FTSE 100, Taylor Wimpey, Persimmon, Barratt and Berkeley fell 4.4%, 3.5%, 2.2% and 1.9% respectively.
According to Rightmove, UK house prices declined at the fastest pace for the month of August since 2018, while year-on-year, they declined for the first time since prior to the pandemic, according to numbers from Rightmove. The property portal’s latest findings showed house prices fell 1.9% on-month to £364,895 in August. It is the chunkiest August price fall since 2018. Prices had declined by 0.2% in July from June.
Would-be buyers were ‘preoccupied by holidays, inflation, and the highest base rate since 2008’, Rightmove said. On an annual basis, prices fell 0.1% in August, the first year-on-year decline in house prices since 2019.
The deteriorating outlook in the residential property sector was further evidenced by a profit warning from Crest Nicholson, which sent its shares down 13%.
The housebuilder cut its annual profit forecast, citing worsening trading conditions in the housing market this summer. The company now expects to achieve annual adjusted pretax profit of £50.0 million, which would represent a 64% decline from the £137.8 million achieved in the prior year. It had previously expected a profit outcome of £73.7 million, the company said in June, which would have been in line with published consensus at the time.
‘Against a backdrop of persistently high inflation and rising interest rates, trading conditions for the housing market have worsened during the summer of this year. While pricing has remained resilient in a market with limited supply and few distressed sellers, the economic uncertainty is deterring prospective home movers,’ it explained.
The prospect of further interest rate hikes is also hitting confidence in the property sector. The UK bank rate currently stands at 5.25%. According to TradingEconomics, the market is expecting rates to climb by at least 50 basis points to 5.75% by the end of the year.
Sterling was quoted at $1.2739 early Monday, edging up from $1.2739 at the London equities close on Friday.
Helping to spare the FTSE 100 from falling into the red were share price rises for BP and Shell, which rose 1.2% and 1.1% respectively.
The oil majors - among the FTSE’s largest constituents by market cap - were tracking the price of oil higher. Brent oil was trading at $85.36 a barrel early Monday, higher than $84.21 on Friday.
Gold was quoted at $1,888.65 an ounce, lower than $1,892.45.
Elsewhere in the main market, Ferro-Alloy shares plunged 21%.
The Kazakhstan-focused vanadium producer and developer said it expects the concentrate supply delays and the continuing low vanadium prices to have a ‘material impact’ on its third-quarter financial results.
‘The company believes that both the production and financial results for 2023 are still likely to be significantly better than those achieved during 2022 notwithstanding the concentrate supply issues incurred to date,’ it added.
In European equities on Monday, the CAC 40 in Paris was up 0.5%, while the DAX 40 in Frankfurt was up 0.4%.
German producer prices fell by more than expected in July, according to official data, due to lower energy costs.
Destatis said prices fell 1.1% on a monthly basis last month, compared to a 0.3% decline in June. FXStreet-cited market consensus had been expecting a 0.2% fall for July. Annually, prices dropped 6.0% in July, having risen 0.1% in July. Market forecasts had predicted a 5.1% decline.
The euro traded at $1.0886, higher than $1.0876. Against the yen, the dollar was quoted at JP¥145.40, edging up versus JP¥145.20.
The trajectory of US interest rates will also be in focus this week, with all eyes on the Federal Reserve’s Jackson Hole Symposium. Fed Chair Jerome Powell is expected to speak on Friday.
Investors are bracing for some potentially hawkish rhetoric, in light of last week’s minutes from the Fed’s most recent meeting. The minutes had shown the central bank still sees ‘significant’ upside risks to inflation.
‘This being said, the fear of decidedly hawkish Fed is already priced in, and if there is no more hawkish surprise from this week’s Jackson Hole meeting, tensions among investors could ease by next week, and give markets some breathing room,’ said Swissquote Bank senior analyst Ipek Ozkardeskaya.
In contrast, China’s central bank cut a key interest rate in an attempt to counter the post-Covid growth slowdown in the world’s second-largest economy. The one-year loan prime rate, which serves as a benchmark for corporate loans, was reduced to 3.45% from 3.55%, the People’s Bank of China said in a statement, while the five-year LPR, which is used to price mortgages, was held at 4.2%.
Closely followed by the markets, the two rates are now at historic lows, after previous reductions in June. The decision is intended to encourage commercial banks to grant more loans and at more advantageous rates
‘Investors were disappointed after the Chinese central bank decided against cuts to some of its key lending rates and lowered others by less than expected. Media reports over the weekend had pointed to a more concerted easing in monetary policy, with the People’s Bank of China asking lenders to boost loan making,’ Lloyds Bank analysts said.
In China on Monday, the Shanghai Composite closed down 1.2%, while the Hang Seng index in Hong Kong was down 1.7% in late dealings. Meanwhile, the Nikkei 225 index in Tokyo closed up 0.4%. The S&P/ASX 200 in Sydney closed down 0.5%.
In the US on Friday, Wall Street ended mixed, with the Dow Jones Industrial Average up 0.1%, the S&P 500 flat and the Nasdaq Composite down 0.2%.
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