Market report: Thursday close
The undeniable slowdown in the UK housing market sent a bone-tingling shiver through the banking sector today as fears that the great property-fuelled consumer boom is finally coming to an end.
Big mortgage lenders like Northern Rock were the worst-hit as hard evidence of the first fall in house prices for two years was revealed by the August Rics survey. Northern was 33p off at 639p, Alliance &Leicester fell 26p to 937½p and Royal Bank of Scotland was down 6½p at 535p but Barclays rose 7p to 615p.
Not only did the number of new buyers fall for the ninth month in a row, but the drop was steeper than at anytime since August 2004, said Rics. BNP Paribas economist Alan Clarke says mortgage approvals are going to have to decline.
The Footsie recovered after lunch having struggled all morning and the blue-chip index closed up 57.7 points at 6363.9.
The major oil producers were up as investors calculated spiralling fuel prices would force customers to pay more, rather than squash demand. Shell rose 30p to 2044p while BP was 4½p higher at 572p.
Hopes that Scottish & Newcastle (S&N) might fall happy victim to Carlsberg are rapidly disintegrating following dismissive words from one of the top bods at the Danish brewer.
Finance officer and deputy chief executive Jorn Jensen has told investors in New York that he has not yet seen a solid business case for a full combination with S&N. Shares in the brewer sank 3½p to 611p. Merrill Lynch has downgraded S&N to neutral, concluding that a bid 'is unlikely to be imminent'.
SABMiller, which yesterday was fingered as a bidder for Irish cider outfit C&C, rose 13 today to 1341p.
Cable & Wireless put on an impressive show, up 7½p at 174.3p with investors encouraged by half-year results from Global Crossing UK, a subsidiary of US provider Global Crossing. These showed gross margins had risen from 38% to 49%.
Fashion house Burberry has taken a downturn in recent months, and has underperformed the market, says Citigroup, which adds it now presents 'an attractive entry price'.
The shares today rose 1½p to 596p and have tracked down from an all-time high of 720½p since April. Citigate still makes it a buy but has lowered its target from 780p to 700p.
The Qatari Investment Authority moved a step closer to taking a 31% stake in the London Stock Exchange after rival bidder Temasek pulled out last night. A conglomerate of Italian banks led by Monte dei Paschi also pulled out yesterday and the story is the LSE, down 10p at 1391p, told them their involvement would not be considered friendly.
Global Energy Development leapt 25½p to 115½p as it said it was being stalked by several bidders. The petroleum explorer said most of the interest had been sparked by discussions it had been holding with potential development partners.
TAKING STOCK: Market news in brief
BANKING & FINANCE
British subprime lender Cattles shrugged off fears it may be caught up in the credit crunch, saying its business is based on 'close customer relationship management and accumulated knowledge of customer behaviour'. First-half profits leapt 28% to £60m.
BUILDING & PROPERTY
Insulating new homes to make them more energy efficient is fuelling a profit boom at SIG. The quoted builder said pretax profits rose 31% to £62m in the first half, with underlying profit growth of 20% in the UK augmented by a boom in work in Poland and Germany.
CONSUMER
Yum, yum. Chocolate-maker Thornton's long-awaited turnaround based on is proving flavoursome. Dresdner Kleinwort was impressed by the consensusbeating profits, and suggests that there is scope for further upgrades as the year progresses.
ECONOMY
Economists said today's grim house-price figures, which showed prices falling in August for the first time since 2005, put more pressure on the Bank of England to cut interest rates. The Royal Institution of Chartered Surveyors said the five interestrate rises in the past year put off buyers.
HEALTH
Interim figures from Alliance Pharma revealed sales of £7.8m and a £700,000 pre-tax loss. Broker Numis Securities expects the company, which markets and distributes prescription products, to see stronger results for the second half as supply shortfall problems are resolved.
NATURAL RESOURCES
Cairn Energy's post-results rally means it looks fully valued, says Credit Suisse. Better off buying up Tullow or Lundin, it adds, although Cairn may be worth revisiting when more details about the Capricorn exploration programme are known.
SUPPORT SERVICES
Aggreko, which supplies power to events such as Glastonbury, today said full-year profits will be 'well ahead' of market expectations of £110m. Last year it made £83m. First-half revenues were up by a third to £317.5m and profits rose 60% to £47.5m.
UTILITIES
British Energy deserves your cash says Morgan Stanley, foreseeing higher longterm energy prices with uranium so dear. It upgrades BE to equalweight, with Drax, but says BE looks a better bet given uncertainty surrounding Drax's share buyback.
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