Yesterday's trading: Housing sector rally 'won't last'

By Geoff Foster for MailOnline
Updated:

 

Industry insiders believe it will not be long before consolidation hopes again raises the roof on housebuilders. But Cazenove must be confident that corporate activity is some way off because it yesterday advised clients to take some money off the table after the sector's staggering 30% rally since July 7.

Geoff Foster, Daily Mail City

Geoff Foster: Daily Mail

Caz said although it was not surprised to see a relief rally, it has been taken aback by the sheer scale of the recovery, driven by the closure of many hefty short trading positions. It reckons the UK housing market downturn has now entered a new phase. The twin forces of credit famine and the feel-bad factor are at play at the same time and the rally has run its course.

Believing the newsflow over the summer and the trading statements during the reporting season in late August and early September will take the shine off the sector again, the comments left Barratt Developments 7¾p lower at 102½p, Taylor Wimpey 1½p cheaper at 48½p and Persimmon 6½p off at 348¾p.

Redrow dipped 3p to 150p but is strongly tipped to lose its independence before the end of the year. Toscafund, the hedge fund run by former number-one-rated banking analyst Martin Hughes, has raised hopes by increasing its shareholding to 27% from 18.1%, apparently through the purchases of CFDs, or contracts for differences. Redrow's top three institutional shareholders hold around 15% and broker Kaupthing says: 'Its not hard to see how Redrow could find itself "in play" - its poison pill at the moment principally being the state of the underlying market'.

Bovis Homes, which has often been mentioned in the same breath as Redrow, lost 21¾p to 370p.

Across the Pond, new data that painted a gloomy portrait of the troubled US housing market helped drag Wall Street 150 down in early trading. That exerted downward pressure on the Footsie which ended 87.6 points lower at 5,362.3. Sales of existing US homes in June fell to its lowest level in a decade. The news left plumbing giant Wolseley 22½p down at 328½p.

Yet another profits warning from discount airline EasyJet's (37½p off at 332½p) caused British Airways to quickly lose altitude and close 21¼p lower at 242p despite a further fall in the oil price. Reflecting weaker metal prices, Eurasian Natural Resources lost 66p to 949p, Xstrata 207p to 3215p and Lonmin 154p to 2415p.

Investors pulled the shutters down on stores on hearing that UK retail sales fell 3.9% in June. The sharpest monthly fall since records began in 1986 left fashion retailer Next 48p lower at 1016p and Marks & Spencer 10¼p cheaper at 259½p.

Morgan Stanley raised its rating on the London Stock Exchange to equalweight from underweight and the shares touched 903½p before closing 24½p better at 849p. Helping sentiment too was the fact that Wednesday's total turnover in London was 6.6bn shares, well up on the 5bn traded in New York. City veterans said it was the first time ever Wall Street had come second.

Up a further 19½p in early trading as rumours of a possible bid from BBVA of Spain refused to lie down, HBOS succumbed to profit-taking and closed 3½p easier at 301½p. Citigroup shaved its target price to 250p and 275p saying bank balance sheets may still come under renewed pressure. Bradford & Bingley advanced 3½p more to 59½p following reports it has raised £2.5bn of funding by successfully completing its first securitisation of the year.

Cadogan Petroleum returned from a short suspension after the group said that recent reports that its interests in oil licences in the Ukraine have been nullified by a court ruling are incorrect. And it doesn't think there are grounds to challenge said licences.

Stock market information

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Financial data - newspaper and pen

However, its reassuring comments fell on deaf ears and many investors sprinted for the exit. Floated at 230p only last month, Cadogan crashed to 60p before rallying to finish 45¼p down at 102¼p on turnover of 13.6m.

Profit warnings were commonplace among small cap stocks. Burst Media shed 1¼p to 6½p, Foundations 28p to 80p and Speymill 2½p to 28p after warning that profits will not match expectations.

Latchways, the safety systems company, rose by 22½p to 802p on a positive trading statement in which it said it had not seen any signs of the current economic malaise on its business. It has a strong balance sheet with good cash flows.

Mobile phone gambling specialist Probability buzzed 2p higher to 46p on strong results. Net gaming revenues soared 152% on the year as it doubled its customer base over the 12 month period.

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