Citywire printed articles sponsored by:
View the article online at http://citywire.co.uk/wealth-manager/article/a706022
House builders rally as Help to Buy brought forward
House builder shares rallied, bucking broader market declines, after prime minister David Cameron’s announcement that the second part of the government’s ‘Help to Buy’ scheme would launch next week.
The gains for companies including Barratt, (up 3.4%), Bellway (up 2.6%) and Persimmon (up 2.1%) bucked a broader market trend sharply downwards as the US government failed to agree a budget deal to prevent a government shutdown.
The decision to bring forward the second part of the government’s scheme three months earlier than planned – helping first-time buyers to take out 95% mortgages – comes amid criticism that the government is creating a property bubble.
‘This should be helpful for housebuilders’ and merchants’ shares as the scheme’s benefits are brought forward,’ commented analyst Charlie Campbell of Liberum.
‘Our preferred stocks are Barratt (Buy), Taylor Wimpey (Buy from Hold) and Travis Perkins (Buy). These housebuilders have relatively low margins, making them most sensitive to movements in house prices.’
The house builders’ gains weren’t enough to prevent declines on the FTSE 100, which was trading down 0.7%, or 46 points, to 6,468 in line with losses across Europe.
With political divisions in the US, a government shutdown looks increasingly likely, with non-essential staff forced to take unpaid leave.
Markets globally feel pressured because even if US Congress resolves its budget differences by the 1 October deadline, American lawmakers would immediately move to the next fiscal dispute over raising the $16.7 trillion debt ceiling.
Jonathan Sudaria of Capital Spreads questioned the sense of the market sell-off. 'We’ve been in this knife-edge situation multiple times since 2011 and although the herd is expected to head for the exit on the open of the European bourses, will Tesco sell less bread, BMW less cars and LVMH less handbags? No, and the more eagle-eyed traders may take this as an opportunity to snap up some bargain,' he commented.
Adding to these woes is the situation in Italy, where the country's centre-left prime minister Enrico Letta is seeking urgent parliamentary support for a new government after centre-right leader Silvio Berlusconi pulled his ministers out of their five-month-old coalition between the People of Freedom and Civic Choice parties.
News sponsored by:
Today's top headlines
More about this:
Look up the shares
- Persimmon PLC (PSN.L)
- Barratt Developments PLC (BDEV.L)
- Taylor Wimpey PLC (TW.L)
- Travis Perkins PLC (TPK.L)
On the road
on Dec 06, 2013 at 14:28