Investors nervous about possible American government shutdown and Italian government collapse
With shares undermined by political chaos in the US and Europe, as well as weak Chinese data, housebuilders are proving a bright spot.
The UK government's decision to bring forward the next stage of its Help to Buy programme, a £12bn mortgage guarantee scheme to boost the housing market, has lifted Persimmon 19p to £10.80, making it the biggest riser in a falling FTSE 100. Among the mid-caps, Barratt Developments is 9p better at 311.1p. Both have also been helped by positive comments from JP Morgan Cazenove. The broker said:
The housebuilders underperformed the market by around 11% in the third quarter, impacted by worries over the scale of upside and longer-term sustainability of earnings, driven in turn by concerns over eventual interest rate increases, cost inflation and speculation that Help to Buy could be withdrawn; all of which are concerns that we believe to be misplaced. Despite taking what we view as a conservative stance on house price inflation, volume growth and cost inflation, our earnings per share estimates for 2014 and 2015 are around 25% ahead of Bloomberg consensus. We view the recent sell-off as a buying opportunity.Not only has Help to Buy not been withdrawn, the plan which was due to start in January is now likely to begin within days. But it has caused some concern, with opponents suggesting it could fuel a new housing bubble. But that has not stopped the rise of other builders, with Bellway up 33p at £12.95 and Taylor Wimpey adding 1.85p to 98/85p.
Overall the FTSE 100 has fallen 46.62 points to 6466.04, hit by worries about a US government shutdown as politicians fail to reach agreement on the country's budget. In Italy the government is poised for a confidence vote on Wednesday after Silvio Berlusconi told his party to resign from the coalition, while in Greece the arrest of Golden Dawn members has renewed political uncertainty in the struggling country. Michael Hewson, senior market analyst at CMC Markets, said:
If investors had been hoping that common sense would prevail over the weekend, in either Italy or the US for that matter, then they would have ended up sorely disappointed. Given the protagonists involved in events either side of the Atlantic any other outcome, would probably have been wishful thinking and so it has proved.The effect on the fragile US economy cannot be overstated as federal employees get put on temporary leave, causing drops in economic output, consumer spending, retail sales and other related economic indicators.Even if this particular pot hole is somehow avoided the thorny problem of the raising of the debt ceiling by October 17 is the next carbuncle for markets to obsess about.The small matter of the latest US employment report, due Friday, could well be the victim of any US government shutdown, though we will still get sight of the September US ADP jobs report on Wednesday for further clues about the health of the US labour market.On top of that an HSBC manufacturing survey came in at 50.2, up from 50.1 but lower than the initial reading of 51.2. So mining shares were among the leading fallers on worries of falling demand from a key customer, with Anglo American 34.5p lower at 1505.5p and Glencore Xstrata down 7.6p at 336.4p.
PersimmonBarratt DevelopmentsBellwayTaylor WimpeyAnglo AmericanGlencore XstrataNick Fletchertheguardian.com © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds |
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