George Osborne triggered a rally in house building stocks, with Persimmon in pole position, as the chancellor announced an extension to the ‘Help to Buy’ scheme.
The house builders led UK stocks higher as part of Europe-wide gains in spite of the news yesterday that Crimea had voted to split from Ukraine and join Russia, ratcheting up tensions between Moscow and the west.
The markets have already priced in the risks, said David White, a trader at Spreadex. ‘Yet as with all ongoing geopolitical concerns, volatility is unlikely to die down completely,’ he said. ‘Market participants will be sure to employ knee-jerk reactions to any novel information surrounding political commentary, sanctions and military movements.’
The Russia-Ukraine conflict, as well as worries over China’s economic growth weighed on markets last week, despite better growth news in the US, Europe, and the UK. The FTSE 100 fell for six consecutive days and is now down nearly 3% so far this year, having risen 14% in 2013.
But on Monday morning the blue chip index was trading up 0.4% to 6,556.
Persimmon (PSN.L), Bovis Homes (BVS.L), Barratt (BDEV.L), Bellway (BWY.L) and Taylor Wimpey (TW.L) were all up around 5% after Osborne's weekend announcement that the government would extend its Help to Buy scheme for newly built homes by four years until 2020.
‘This is helpful to the new housebuilders,’ commented Charlie Campbell of Liberum. ‘We think there is value across the sector after the recent pull back, and highlight value in Bellway (Buy), which has lagged the sector by 8% since the start of the year.’
Vodafone Group (VOD.L) rose nearly 1% to 223p after the telecommunications company agreed to buy Spanish cable operator Grupo Corporativo Ono SA for 7.2 billion euros.
Investors are looking ahead to the US Federal Reserve’s policy meeting starting on Wednesday. In Janet Yellen’s first meeting as Chair of the central bank she is expected to announce a further $10 billion cut to the scale of monthly asset purchases. Updates on industrial production and inflation are also due from the US in the coming week.
In the UK all eyes will be on chancellor George Osborne’s Budget on Wednesday, as well as the minutes from the Bank of England’s March monetary policy meeting and labour market figures.