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Buoyant builders fail to prop up FTSE as oil falls

A late drop in oil prices saps energy stocks and pushes FTSE 100 into the red, though house builder Bellway boosts sentiment.

 
Buoyant builders fail to prop up FTSE as oil falls
 

A late drop in the oil price sapped energy stocks and pushed the FTSE 100 into the red this afternoon, offsetting a rally in housebuilders.

The blue chip index closed 26 points or 0.3% lower at 7,474 with miners such as Anglo American (AAL) and Glencore (GLEN) joining BP (BP) and Royal Dutch Shell (RDSb) on the list of big fallers.

Reports that US crude inventories were still increasing pushed Brent crude futures $1.73 down at $46.99 with West Texas crude futures sliding a similar amount to $44.77 a barrel.

The fall in oil stocks took some of the shine off a good day for mid-cap stocks, with the FTSE 250 index closing 115 points or 0.6% higher at 19,974, having earlier been up 163 points as it extended its recovery from last Friday's shock election result..

A positive update from Bellway boosted housebuilders and helped the mid-cap rally but the pound slipped following a slide in wage growth that showed the growing pressures on consumers and the UK economy.

Bellway (BWY) was among the leaders, gaining nearly 6% to £29.74 after upgrading its guidance for the year and reporting strong sales, saying the political uncertainty before the election had not deterred buyers of new homes.

‘BWY shares are back challenging the £30 mark and all-time highs posted back in May. Today’s gains extend last week’s bounce and add yet more positive technical signals. The shares remain within a rising channel going back to late last summer which could yet usher them to £31 or better, said Mike van Dulken, head of research at Accendo Markets.

Bellway’s statement bolstered its big rivals with Barratt Developments (BDEV) climbing to the top of the FTSE 100 with a 3.2% gain to 594p.

The FTSE Small Cap index also shed earlier gains to close three points down at 5,627. Star of the show was St Ives (SIV) which shot up 34% to 12.5p as the printer and marketing services group reassured investors over its strategic review. It said revenues in the first four months of the second half of its year were up 12% on a year ago, giving it the cash flow to further reduce debt. Broker N+1 Singer upgraded the stock to ‘buy’ from ‘hold’.

The positive tone of the UK stock market came after the US hit fresh highs as technology stocks recovered from their recent sell-off and as investors anticipated a further 0.25% interest rate rise by the Federal Reserve. The decision will be announced at 6pm this evening UK time.

The pound ebbed and flowed, initially shedding some of yesterday’s gains with a 0.2% slip to $1.2725 against the dollar after mixed UK labour market data.

While the number of employed people rose 109,000 in the three months to April, pushing unemployment to a record low of 4.6%, the Office for National Statistics said wages had grown at just 1.7% in the period, its weakest since January 2015 and down a percentage point since November.

‘Coming fast on the heels of data showing consumer prices rising at an annual rate of 2.9%, the fastest for four years, such meagre wage growth suggests that pay is falling in real terms,’ said Chris Williamson, chief business economist at HIS Markit.

‘The drop in real pay adds to worries about the economic outlook. Recent official and survey data have already shown consumer spending coming under strain as households feel the pinch from rising prices and low pay. Today’s data will add further to the likelihood of consumer spending acting as a drag on the economy in coming months, leaving growth largely dependent on exports, corporate services and business investment,’ he added.

The pound later recovered to trade 0.4% up against the dollar at $1.2804.

2 comments so far. Why not have your say?

Hotrod

Jun 14, 2017 at 12:43

The house build story is a "no brainer" The country has a severe shortage of housing stock all the more exacerbated by the, as yet, unstoppable rise in immigration.

The question in my mind is: How many of the new immigrants arriving are ready, willing, and able to be trained in the trades needed to build houses? Without a substantial increase in skilled tradesmen the deficit is never going to be addressed.

As regards affordability, I'm not too concerned. The market has consistently shown the people will move Heaven as well as earth in order to buy their own home.

People are spending less in the shops. Yes; that could well be the case, but it might not be due entirely to a lack of disposable income, you have to factor in the fact that consumer durables have become just that. More durable.

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Christopher

Jun 15, 2017 at 11:20

A lot of our builders were from eastern Europe and many are going home. More folly from Brexit coming home to roost.

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