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Housebuilders hit as rate rise fears spark FTSE dip

Housebuilders hit as rate rise fears spark FTSE dip

Housebuilders and airlines have led the FTSE 100 lower as concerns over interest rate rises and a jump in the price of oil took their toll.

Housebuilders Barratt Developments (BDEV) and Persimmon (PSN) were the biggest fallers, dropping 3.3% and 2.7% respectively to 348.7p and £11.97 as worries over tighter monetary policy continues to weigh. The FTSE 100 fell 31 points, or 0.5%, to 6.794.

Housebuilders have had a difficult time in recent weeks after the Bank of England warned that interest rates may need to rise sooner than expected. That message from the Bank has now gained fresh impetus after David Miles, one of the most dovish members of the monetary policy committee, said in an article for the Sunday Telegraph that he expected to vote for a rate rise by the end of the year.

Real estate developers British Land (BLND) and Land Securities (LAND) also fell, by 1.1% and 1% respectively to 679p and £10.10. Tool hire company Ashtead Group (AHT), which has benefited from the UK's construction boom, was another casualty, dropping 17.5p, or 1.6%, to 836p.

EasyJet (EZJ) was another big faller, dropping 30p, or 2.1%, to £14.22, after the price of Brent crude oil surpassed $115, its highest level in nine months, amid concerns over supply due to fighting in Iraq. Sunni insurgents seized control over more towns in the country over the weekend.

British Airways owner International Airlines Group (ICAG) also fell, by 6.5p, or 1.7%, to 378p, while travel agent TUI Travel (TT) shed 6p, or 1.5%, to 381.2p.

Also propping up the oil price was positive news from heavy consumer China, whose manufacturing purchasing manager's index hit 50.8 in June, up from 49.4 in May. Any reading above 50 indicates expansion, and June's figure marks the first time in six months it has crossed that threshold.

The boost to manufacturing in China, a top metals consumer, helped miners to benefit in the morning's trading. The risers included:

  • Rio Tinto (RIO) up 71p, or 2.3%, at £31.48
  • BHP Billiton (BLT) up 32.5p, or 1.7%, at £19.34
  • Anglo American (AAL) up 15.5p, or 1.1%, at £14.72
  • Antofagasta (ANTO) up 6.5p, or 0.8%, at 776.5p 

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