LONDON MARKET CLOSE: Housebuilders Drag FTSE 100 Into Red

(Alliance News) - Stocks in London closed in the negative territory on Friday, as global sell-off continued, with housebuilders weighting on the blue-chip index amid a UK regulator's probe.

The FTSE 100 index closed down 51.78 points, or 0.9%, at 5,799.08 on Friday. The FTSE 250 ended down 105.41 points, or 0.6%, at 17,354.28, and the AIM All-Share closed down 6.75 points, or 0.7%, at 946.81.

The Cboe UK 100 ended down 0.9% at 576.69, the Cboe UK 250 closed down 0.6% at 14,806.75, and the Cboe Small Companies ended down 0.4% at 9,414.91.

In European equities on Friday, the CAC 40 in Paris ended down 0.9% and the DAX 30 in Frankfurt down 1.7%.

"Thursday's mini-crash left the door open for more selling, and investors have rushed through it today in a hurry to take profits before more downside arrives," said Chris Beauchamp, chief market analyst at IG.

The British government has granted itself emergency planning powers to build 29 "Brexit" lorry parks across the country for when EU rules no longer apply from next year.

Statutory Instrument papers, which allow legislation to be brought into force without parliament passing a law, were lodged on Thursday, allowing the government to begin building work on the lorry parks without local authority permission.

The move comes as fears mount of a "no-deal" scenario between London and Brussels about the terms of their future trading relationship, with talks stalled and a deadline looming.

The EU's chief negotiator, Michel Barnier, this week warned there would be no agreement without Britain moving on one of its main red lines: access to UK fishing waters.

Negotiations are also stuck over fair competition rules and state aid mechanisms.

The pound was quoted at USD1.3230 at the London equities close Friday, lower compared to USD1.3272 at the close on Thursday.

The euro stood at USD1.1809 at the European equities close Friday, lower than USD1.1825 at the same time on Thursday. Against the yen, the dollar was trading at JPY106.36, higher compared to JPY106.17 late Thursday.

On the LSE, Imperial Brands closed up 2.7% higher after JPMorgan raised the tobacco company to Overweight from Neutral.

Hikma Pharmaceuticals also benefited from an increase from Barclays to Overweight from Equal Weight. The generic drugmaker ended the day 1.9% higher.

International Consolidated Airlines closed up 1.7% after the UK government said on Thursday that there would be no change to its coronavirus quarantine exemption list.

There had been speculation that Westminster would reimpose the quarantine requirement on Portugal due to a spike in Covid-19 cases, leading many holidaymakers to pay hundreds of pounds to fly home this week.

Conversely, housebuilders were among some of the worst performers in the large-cap index after the UK competition regulator said it has found "troubling evidence" house developers have handed out "potentially unfair" terms concerning ground rents in leasehold contracts and potential mis-selling.

As a result, the Competition & Markets Authority has launched an enforcement action as it believes housebuilders may have broken consumer protection law.

The CMA has written to four London-listed developers over the action, outlining its concerns: Barratt Developments, Countryside Properties, Persimmon and Taylor Wimpey.

Barratt Developments closed the worst blue-chip performer down 7.0%, Persimmon closed down 5.2% and Taylor Wimpey closed down 5.0%. FTSE 250-listed Countryside Properties was down 4.5%.

In response, Barratt said it is "committed to putting its customers first and will continue to cooperate with the CMA whilst it completes its investigation".

High Wycombe-based Taylor Wimpey also noted the enforcement action, adding: "The board takes this very seriously and Taylor Wimpey will continue to fully cooperate with the CMA, provide the further information to be requested by the CMA in the coming weeks and work with them to better understand their position."

Persimmon said some of its properties were sold on a leasehold basis in the past but noted - following consultation with government, stakeholders and customers - it took the decision to stop selling leasehold houses where Persimmon owns the land freehold in 2017. The company added it would be engaging fully with the CMA.

The CMA will also be investigating certain firms who bought freeholds from these developers and have continued to use the same unfair leasehold contract terms.

Countryside echoed its larger peers, commenting: "We are committed to resolving this issue to the satisfaction of our customers and will continue to co-operate fully with the CMA's ongoing investigation."

The UK corporate calendar for Monday has trading statement from Associated British Foods, full-year results from Dechra Pharmaceuticals and half-year results from Blackbird.

Gold was quoted at USD1,919.60 an ounce at the London equities close Friday, down from USD1,926.09 late Thursday.

Brent oil was quoted at USD42.74 a barrel at the London equities close Friday from USD43.42 late Thursday.

Stocks in New York were down at the London equities close, with the Dow Jones down 1.6%, the S&P 500 index down 1.8%, and the Nasdaq Composite down 2.5%.

"It would be unfair to pin today's move on the headline miss in non-farm payrolls, since the unemployment rate and earnings figures are sending the right kind of message about the direction of travel for the US economy. This market selloff still looks like it is in need of an actual reason, apart from the evidently sensible one that what goes up must come down," said Beauchamp.

US job creation eased in August amid signs the country's economic recovery is starting to lose steam, the latest figures from the Department of Labor showed on Friday.

The US economy added 1.4 million jobs in August, easing from a downwardly revised 1.7 million in July. The figure was in line with market forecasts.

The headline US unemployment rate was 8.4% in August, down from 10.2% in July. The reading beat market estimates, cited by FXStreet, of 9.8%.

The Labor Department said the improvements in the labor market reflected the continued resumption of economic activity in August that had been curtailed due to the coronavirus pandemic and efforts to contain it.

In Monday's economic calendar, there is UK Halifax house price index report at 0830 BST.

By Evelina Grecenko; evelinagrecenko@alliancenews.com

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