Wealth Manager - the site for professional investment managers

Register to get unlimited access to all of Citywire’s Fund Manager database. Registration is free and only takes a minute.

Inflation fall hits pound and boosts house builders

Inflation fall hits pound and boosts house builders

House builders rallied after strong results from Persimmon and low inflation figures added further weight to arguments to delay interest rate rises.

Persimmon (PSN) perked up 5p to £13.40 after a choppy morning's trading for the stock, which saw it reach £13.68 after posting a 57% rise in pre-tax profit. The solid results come a day after Bovis Homes (BVS) announced a 150% rise in half-year profits. Rival Barratt Developments (BDEV) rose 1% to 368.5p amid enthusiasm for the sector.

House builders received a further boost from news that inflation fell by more than expected last month. The UK consumer prices index slipped to 1.6% from 1.9% in June, below a consensus forecast of 1.8%. House builders have enjoyed strong performance in an environment of historically low interest rates. The low inflation rate suggest the cost of borrowing will remain frozen at 0.5% at least until the end of the year. The news sent the pound tumbling to $1.6642.

'On the face of it this supports an "on hold" stance from the Bank of England,' said James Knightley, economist at ING. 'The combination of sterling strength (making goods cheaper), along with weak wage growth and lower energy prices, which are limiting business cost growth, means inflation looks to remain contained for now.

'This further eases the pressure on the Bank of England to consider near-term interest rate rises and pushes the balance more in favour of a delay to rate hikes versus our current November view for the first policy tightening move.'

The FTSE 100 added 33 points, or 0.5%, to 6,774. BHP Billiton (BLT) was the biggest faller, dropping 4% to £19.83 as it revealed plans to spin off areas of its business. Investors were disappointed by the lack of a share buyback, as they had hoped to receive around $5 billion (£3 billion).

BHP Billiton will focus on iron ore, copper, coal and petroleum in the new simplified structure. The spin-off company will house BHP Billiton's aluminium, manganese and nickel assets. South African energy coal, Australian metallurgical coal, silver, lead and zinc assets will also be included in the new venture.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play JPM’s Negyal: Back divis to temper EM volatility

JPM’s Negyal: Back divis to temper EM volatility

Omar Negyal, co-manager of the JPMorgan Global Emerging Markets Income trust, says a dividend approach to emerging markets reduces the volatility of investing in the asset class.

Play WMR: Why Russia will lose this war

WMR: Why Russia will lose this war

Author and journalist Adam Lebor believes a perfect storm is brewing when it comes to the Russian economy. .

Play WMR: Gerard Lyons warns Asia is the real risk, not Russia & Ukraine

WMR: Gerard Lyons warns Asia is the real risk, not Russia & Ukraine

Chief economic adviser to London mayor Boris Johnson outlines the geo-political risks in Asia and explains why the risk of another eurozone crisis must not be underestimated.

Your Business: Cover Star Club

Profile: 'new normal' now is as dangerous as when it was applied to tech

Profile: 'new normal' now is as dangerous as when it was applied to tech

7IM's CIO Chris Darbyshire says he has been re-energised by his new role, but has little time for 'new normal' doom-mongers

Wealth Manager on Twitter