LONDON MARKET CLOSE: Housebuilders Lead Gains As Flood Repairs Loom

LONDON (Alliance News) - UK stocks closed broadly higher Tuesday, adding to the string of gains posted in the run-up to Christmas, as market participants returned to their desks following the four-day holiday weekend.

"A strong US open ensured this abbreviated week of trading got off to a good start, lifting even the sluggish and grumpy FTSE in the process," said Connor Campbell, financial analyst at Spreadex. "The FTSE likely would have been higher if wasn’t for the gains made by its housing sector being effectively negated by the Scrooge-like commodity stocks and a renewed slide from the supermarket sector," he added.

The FTSE 100 index closed up 1.0% at 6,314.57, while the FTSE 250 added 0.9% to 17,569.39 and the AIM All-Share index 0.6% to 732.59. In Europe, meanwhile, the CAC 40 in Paris and DAX 30 in Frankfurt ended the day up 1.8% and 1.9%, respectively.

On Wall Street, at the UK equity market close, the DJIA, NASDAQ Composite and S&P 500 were positive by between 0.9% and 1.1%.

At the individual UK stock level, J Sainsbury, closing down 0.5%, ended the day among the heaviest fallers in the FTSE 100, after the UK Competition and Markets Authority said Tuesday it has decided not to accept undertakings given by Celesio in respect of its proposed acquisition of Sainsbury's pharmacy business.

The acquisition will therefore be referred to a Phase 2 investigation.

The supermarket had agreed to sell its pharmacy business to Celesio for GBP125 million in July. Under the deal, Lloyds Pharmacy, which is owned by Celesio, would buy 281 pharmacies in total, including 277 in-store locations and four located in hospitals, to be re-branded under Lloyds Pharmacy.

Earlier this month, the CMA had ruled that the acquisition may result in a "substantial" lessening of competition in the UK. FTSE 100-listed peer Tesco ended the day down 0.3%.

Energy and mining companies also were among the heaviest fallers in the FTSE 100. Anglo American was the worst blue-chip performer, closing down 6.3%, while Rio Tinto ended the day down 1.4%, and BP ended down 1.4%.

At the other end of the spectrum, housebuilding companies posted strong gains Tuesday, with Taylor Wimpey, Persimmon, Berkeley Group Holdings and Barratt Developments ending the day among the biggest risers in the blue-chip index, all up about 3%.

Spreadex's Campbell, said the "potential windfall from the cost of rebuilding and repairing the numerous homes damaged in the northern floods" was supporting housebuilding stocks.

The insurance industry is set to face a significant bill from the flooding that has devastated large swathes of northern England, according to two estimates of the damage, amid concerns that a new storm, dubbed Frank, could bring further problems for the UK later Tuesday.

KPMG, the accountancy, warned the economic impact of the flooding which hit parts of the UK following Storms Desmond and Eva over the course of December could be nearly GBP6.0 billion, with insurance claims for the flooding estimated to hit around GBP1.5 billion.

KPMG, however, also suggested many households and businesses will not be adequately insured and will have to shoulder about another GBP1.0 billion in costs, with further spending then required by local authorities, along with a big chunk of spending on new flood defences.

PwC, another accountancy, said it estimated the economic loss from the floods could be between GBP900.0 million and GBP1.3 billion, with insurers bearing up to GBP1.0 billion of that.

The cost estimates hit insurance company shares such as RSA Insurance and Aviva in early trade Tuesday, but they had recovered all those losses by the close of business and ended higher.

On AIM, 88 Energy closed up 16%. The company said the Icewine 1 well in Alaska was drilled to its target depth and met all primary unconventional drilling objectives, along with robust conventional finds.

88 Energy said oil shows were recorded in the drill hole, along with good heavy gas and shale gas shows. In addition to the unconventional finds, the company also saw robust results on the conventional oil and gas resources at the project, and a detailed petrophysical log interpretation of those results is now underway, it said.

Amid a dearth of macroeconomic data from the UK and Europe, the US Conference Board released a report showing that its US consumer confidence index rose by more than expected in December.

The Conference Board said its consumer confidence index climbed to 96.5 in December from an upwardly revised 92.6 in November. According to FXStreet,com, economists had expected the consumer confidence index to rise to 93.8 from the 90.4 originally reported for the previous month.

"As 2015 draws to a close, consumers' assessment of the current state of the economy remains positive, particularly their assessment of the job market," said Lynn Franco, Director of Economic Indicators at the Conference Board. "Looking ahead to 2016, consumers are expecting little change in both business conditions and the labour market," she added. "Expectations regarding their financial outlook are mixed, but the optimists continue to outweigh the pessimists."

In the forex market, the pound traded at USD1.4792 at Tuesday's equity market close, while the euro traded at USD1.0914.

In the commodities market, gold was quoted at USD1,069.25 an ounce at the UK equity market close Tuesday, having stood at USD1,073.10 on Christmas Eve. Brent oil traded at USD37.65 a barrel at Tuesday's equity close, level with USD37.55 a barrel late last Thursday.

In another quiet day in the data calendar Wednesday, UK Nationwide housing price data for December are due to be released at 0700 GMT, ahead of Italian producer price index readings for November at 0900 GMT. In the US, the Mortgage Bankers Association is set to publish mortgage applications information at 1200 GMT, while the National Association of Realtors releases pending home sales data for November at 1500 GMT.

There are no scheduled events in the UK corporate calendar Wednesday.

By James Kemp; jameskemp@alliancenews.com; @jamespkemp

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