Market report: Friday close

By Hugo Duncan for the Daily Mail
Updated: 12:15 EDT, 12 October 2007

Housebuilders were hit by heavy selling in London today as concerns about a slowdown in the housing market troubled investors.

Shares in the sector continued their slide with Barratt Developments badly hit, down 23p to 699p. The stock has lost nearly half its value since its peak of 1289p in February.

Barratt was followed down by bluechip rivals Taylor Wimpey, off 9½p to 281¼p, and Persimmon, 27p lower at 976p, while among the midcaps Redrow lost 8½p to 380p.

Bovis Homes fared better after its £72m acquisition of Elite Homes - a 'small but important' deal, according to Evolution Securities. Bovis shares rose 10p to 694p.

Housebuilding shares have tumbled this year on fears the housing boom is coming to an end as buyers struggle to deal with rising interest rates and mortgage costs. The subprime mortgage crisis in the US has further dented confidence.

The latest falls came as the FTSE 100 index rose 6.20 to 6730.70. Last night, it closed just shy of its seven-year high of 6732 and investors saw it as a good opportunity to bank profits, leaving the FTSE 250 down 46.6 points at 11,576.30. In New York, this afternoon the Dow Jones Industrial Average opened 10.7 points higher at 14,025.8.

Miners led the decline despite an upbeat note from Lehman Brothers, which lifted its targets across the sector-Rising metal prices have underpinned the sector's rally this year but investors today looked to take profits. BHP Billiton was down 2p to 1878p, Vedanta Resources down 50p to 2267p, Anglo American dropped 45p to 3435p and Rio Tinto up 13p to 4576p.

The management shake-up at BP earned approval in the City today. Theodoor Gilissen and Evolution Securities welcomed plans put forward yesterday by new chief executive Tony Hayward to strip out layers of management and concentrate on improving efficiency.

Both brokers raised their ratings on the stock, and BP shares ticked 25½p higher to 619p.

Rumours swept the City that Shell is preparing a takeover bid for BG Group, and BG shares gained 13p to 896p. Royal Dutch Shell was up 11p to 2045p.

Northern Rock put on 15¼p to 273¼p on bid interest from Virgin Group but the rest of the banking sector was in the red. Royal Bank of Scotland fell 7p to 546p, HBOS was down 5½p to 905½p and Lloyds TSB dipped 5p to 557p.

Telecoms stocks were in the spotlight after a string of updates in the City. Citigroup raised its price target on Vodafone from 175p to 200p and increased its earnings forecasts for the year but Exane BNP Paribas thinks Vodafone shares have risen too sharply in recent months. It cut its rating on the stock, which fell 0.20p to 178.30p.

Credit Suisse analysts nudged up their price target for BT from 305p to 330p. They reckon the company will offer higher dividend payments than expected by the City when it reports its half-year results next month. But the shares fell 0.¼p to 314¼p as a rating cut by Morgan Stanley soured the mood.

WPP is likely to post an upbeat trading statement for the third quarter next week, according to UBS, which also highlighted an 'outside possibility' that it will announce a share buyback programme.

'We think WPP is likely to be relatively upbeat, sticking to its view that the Beijing Olympics and the US Presidential elections in 2008 will provide support for growth,' said UBS. WPP shares rose 6p to 711½p.