LONDON MARKET CLOSE: Housebuilders Rise As FTSE 100 Ends Week Lower

LONDON (Alliance News) - Housebuilding stocks, led by Barratt Developments, and grocers J Sainsbury's and Tesco stood out amid a tough end to the week for London's FTSE 100 blue-chip index, which ended down Friday.

The FTSE 100 ended down 1.1%, or 71.00 points, at 6,310.44. The FTSE 250 ended down 0.6%, or 107.98 points, at 16,871.46, while the AIM All-Share lost 0.4%, or 2.72 points, to end at 731.08.

Elsewhere in Europe, the CAC 40 in Paris ended down 0.3% and the DAX 30 in Frankfurt ended down 0.6%.

"The FTSE 100 has run into some technical selling after reaching the 6400, the peaks of the fourth quarter last year and its 200 week moving average," Jasper Lawler, market analyst at CMC Markets, said.

The FTSE 100 underperformed its European peers over the course of the week. Lawler said the blue-chip index suffered partly from a "pullback" ahead of quarterly results from UK banks.

The CAC ended the week up 1.7% and the DAX ended up 3.2%, whereas the FTSE 100 ended down 0.5%.

Standard Chartered ended down 0.7%. The emerging markets bank will be the first of the FTSE 100 lenders to report first-quarter results, getting proceedings underway on Tuesday. Barclays, which reports on Wednesday, ended down 0.5%. Lloyds, down 1.0%, reports Thursday, followed by fellow state-backed lender Royal Bank of Scotland Group, down 1.4%, on Friday.

The "loss of momentum" in stock markets looks "very real," according to Chris Beauchamp, senior market analyst at IG, who fears there could be further falls at the beginning of next week.

"Two weeks of gains look to be at an end as the FTSE 100 sees its losses gather pace into the end of the session," Beauchamp said. The market analyst said the picture looked better on Wall Street, when trading got underway.

Stocks in New York were down at the London close, with the Dow 30 down 0.2%, whilst the S&P 500 was down 0.4%, and the Nasdaq Composite was down 1.4%.

Gold was quoted at USD1,240.70 an ounce at the close Friday, compared to USD1,251.76 an ounce on Thursday. Brent was at USD45.56 a barrel at the London equities close, up from USD45.13 at the same time Thursday.

The pound was quoted at USD1.4381 at the close Friday, against USD1.4330 at the same time Thursday. The euro was quoted at USD1.1242 at the London equities close, compared to USD1.1296 at the close Thursday.

Sainsbury, the grocer, was the bester perform closing up 1.7% at 293.8 pence, after analysts at Deutsche Bank boosted their rating on the stock to Buy from Hold and increased their price target to 325p from 265p. Rival supermarket Tesco ended up 0.8%.

Sainsbury's agreed to acquire Home Retail, ending its long-running pursuit of the Argos owner, at the start of April. While maintaining estimates for Sainsbury's earnings per share in 2016 and 2017 at about 20% below the market view, Deutsche said it expects the acquisition of Argos to add 25% to earnings the following year.

"In our view, investors are reluctant to factor in this earnings accretion due to execution risk," said Deutsche analyst Niamh Mcsherry. "The majority of accretion is driven by improving Argos profitability by cutting costs, and specifically by cutting rents by relocating stores in Sainsbury's stores."

Housebuilders, which have felt the weight of the UK's upcoming June 23 referendum on whether to remain a member of the EU or leave, received a boost from analysts at Liberum. There were upgrades for Redrow, up 2.1%, which the investment bank moved to Buy from Hold, while Barratt Developments, up 0.8%, and Persimmon, up 0.5%, went to Hold from Sell.

"The shares have underperformed with Brexit and prime London the main culprits. Margin pressure remains a threat and not all Brexit risks are priced in, but valuation is much more accommodating," Liberum's Charlie Campbell said.

Liberum maintained a Hold rating on Berkeley Group, which builds homes in London and the south of England. In March, analysts at financial information firm Markit had highlighted negative investor sentiment towards Berkeley.

According to data from the UK's Financial Conduct Authority, hedge funds are shorting about 4.18% of Berkeley's shares, betting that they will fall. The stock closed up 1.1% on Friday. Berkeley shares are down 21% to date in 2016.

Whitbread, the hospitality company, ended up 0.5% at 3,899.79p. The stock price marks an attractive entry point for would-be investors despite softening growth in its Premier Inn and Costa Coffee businesses, analysts at Berenberg said in a note. Berenberg cut its price target on the stock to 5,000p from 6,000p and maintained a Buy rating. The stock is down 11% to date in 2016.

In the FTSE 250, Saga, ended up 2.2% at 205.9p. Acromas, the vehicle owned by private equity firms Charterhouse, CVC and Permira, sold its entire 32% stake in the company, which sells products such as insurance and holidays for people over 50 years old.

Acromas sold 352.7 million shares in a placing with institutional investors at 195.00p per share, raising GBP687.7 million. The shares were placed at a discount to the closing price of the shares on Thursday, which was 201.40p.

The private equity firms were behind floating Saga on the London Stock Exchange in May 2014. Saga Chairman Andrew Goodsell agreed to purchase 2.6 million of the shares placed by Acromas.

In the economic calendar for Monday, before the market open there is the Japanese Leading economic index at 0600 BST.

After the market open, there are IFO business sentiment surveys for Germany at 0900 BST and the UK industrial trends survey at 1100 BST. Later in the day, US new home sales are at 1500 BST and the Dallas Federal Reserve manufacturing business index is at 1530 BST.

In the UK corporate calendar, FTSE 250 investment company Allied Minds reports full-year results. There are also full-year results from recruitment software supplier Dillistone Group and non-life insurance investor, service provider and underwriting manager Randall & Quilter Investment Holdings.

Biotherapeutics company Avacta Group and self-storage space provider Lok'nStore Group both release half-year reports.

By Samuel Agini; samagini@alliancenews.com; @SamuelAgini

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