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Persimmon and housebuilders set foundations for FTSE gains
July 5, 2017 / 8:51 AM / 3 months ago

Persimmon and housebuilders set foundations for FTSE gains

(ADVISORY- Follow European and UK stock markets in real time on the Reuters Live Markets blog on Eikon, see cpurl://apps.cp./cms/?pageId=livemarkets)

* FTSE 100 up 0.1 pct

* Housebuilders shine after Persimmon update

* SIG jumps on first-half results

* H1 results, deal talk gives Ocado modest gains

By Helen Reid

LONDON, July 5 (Reuters) - Britain’s major share index climbed higher on Wednesday, bolstered by buoyant housebuilders after a strong trading update from Persimmon, as strength in basic resource stocks underpinned gains.

The FTSE 100 had risen 0.1 percent by 0830 GMT, outperforming the broader European market, while mid-caps gained 0.5 percent.

Persimmon gained 3.4 percent, on track for its best day in four months, after a robust trading statement which set the housebuilders up for gains as they absorbed a sign of resilience to pressures on the British consumer.

Persimmon said the British general election hadn’t impacted consumers’ demand for new houses, and sales rose 7 percent for the first half.

“All we’ve had at the moment from the housebuilders is signs that things are going better than expected,” said Barry Gibb, research analyst at Beaufort Securities, adding that there is scope for a modest upgrade of estimates by the market in a sector under considerable scrutiny.

“If any of the mainstream housebuilders were to suggest that they are seeing a greater pressure on pricing or reduced level of viewings, it could be taken quite badly by the market,” he added.

Housebuilders Barratt Development and Taylor Wimpey also rose on the more optimistic tone struck by Persimmon over the state of demand for houses.

Also a top gainer was supermarket chain Tesco, up 3 percent after forecast-beating sales figures from wholesaler Booker, which has been under scrutiny from investors since Tesco announced its plan to acquire it.

Miners Glencore and BHP Billiton climbed as basic resource stocks across Europe made robust gains.

Drugmaker GlaxoSmithKline suffered the worst of the handful of fallers, down 1.4 percent after Citigroup cut its rating on the stock to ‘neutral’ from ‘buy, citing slowing HIV market growth.

The broker said risk of the repeal of the U.S. Affordable Care Act could negatively affect volumes and/or price in the HIV treatment market.

Among mid-caps, construction materials supplier SIG jumped 5.8 percent after it said revenue rose 8.1 percent in the first half, helped by strength in mainland Europe.

“Underlying trading has improved relative to the second half of 2016, with European growth outpacing that of the UK, and good progress has been made on reducing leverage,” said Jefferies analyts.

Online grocer Ocado made more modest gains, up 0.3 percent as investors seemed to shrug off its first half results, in which it said it expected a recently clinched international deal would be “the first of many”.

Ocado shares rose sharply in the aftermath of the Amazon-Whole Foods merger deal amid speculation the company could be the object of a future partnership with the U.S. retail giant as it pushes into food distribution. The company said it had seen a pick-up in interest from U.S. players since the deal. (Reporting by Helen Reid; Editing by Toby Chopra)

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