LONDON MARKET CLOSE: Property Firms Help End FTSE's Winning Run

LONDON (Alliance News) - London's main stock indices snapped a run of four consecutive winning sessions on Monday, with the property sector pushing shares lower as it was hit by the weakest set of UK construction data in seven years and broker downgrades.

Having recovered all of its post-referendum losses last week, the FTSE 100 ended lower for the first time since Monday last week. The blue-chip index closed down 0.8%, or 55.57 points, at 6,522.26.

The FTSE 250 snapped a similarly strong run, though it still remained well below its pre-referendum levels, and closed down 2.1%, or 348.79 points, at 16,116.70 on Monday. The AIM All-Share closed up 0.1%, or 0.33 points, at 713.81.

Property companies dominated the fallers list in the FTSE 100, with property developer British Land Co, down 7.2%, and housebuilders Persimmon, down 6.8%, and Barratt Developments, down 6.4%, the worst of the bunch.

Housebuilders were hit by the UK construction purchasing managers' index reading from Markit and the Chartered Institute of Procurement & Supply, which showed the construction industry contracted in June for the first time in over three years.

The index fell to 46.0 in June from 51.2 in May against economists' expectations of a drop to 50.5. Any reading above 50 indicates expansion, while a score below 50 suggests contraction.

Reports from survey respondents widely linked the downturn in business activity to uncertainty in the UK ahead of the June 23 European Union referendum. Just over 80% of survey responses were received before the result was known on June 24.

Markit said the fall in the PMI reading was led by a steep decline in residential building and a reduction in commercial work for the first time since May 2013.

The pound was hit by the data but at the end of the London equities trading session, it traded at USD1.3324 against the dollar, higher than the USD1.3268 seen at the same time on Friday.

Compounding the misery for the property sector, Liberum handed out downgrades to British Land, Hammerson, Intu Properties and Land Securities Group in its post-referendum note on real estate investors.

Liberum said the risks to the real estate sector coming from the UK's vote to leave the European Union are not universal and are likely to hit the London office and retail segments harder, with blows to economic confidence and a weaker cyclical recovery expected.

In European equity markets in mainland Europe, the CAC 40 in Paris closed down 0.9% and the DAX 30 in Frankfurt fell 0.7%.

"Much like the construction PMI damaged the UK index, the Sentix investor confidence figure knocked sentiment in the Eurozone, this dual dose of negative data bursting the market's post-Brexit bubble," said Connor Campbell, financial analyst at Spreadex.

Eurozone investor confidence fell to its lowest level in more than one-and-a-half years in July, as optimism over a spring recovery in the region was dampened by the UK's surprise decision to leave the EU, results of the latest Sentix survey showed.

The Sentix investor confidence index tumbled to 1.7 from 9.9 in June, the think tank said, versus forecasts of a score of 7.4. The latest reading was the lowest since January 2015. The big fall in the headline index was mainly driven by a drastic drop in the expectations component.

At the London close the euro traded the dollar at USD1.1144, just below the USD1.1145 seen at the stock market close on Friday.

Wall Street will return to trade on Tuesday after a holiday weekend.

Precious metals miners continued their strong post-referendum run, tracking gains in the prices of gold and silver. At the London stock market close, gold traded at USD1,351.08 an ounce, compared with USD1,337.16 at the London equities close Friday. Meanwhile, silver hit its highest level since July 2014 at USD21.10 an ounce.

Fresnillo closed as the biggest FTSE 100 gainer, up 7.7% at 1,895.00p, its highest close since the end of 2012. Randgold Resources rose 4.4% at 9,160.00p, its highest ever close.

Brent oil traded at USD50.15 a barrel at the London close, compared to USD49.74 at the same time last Friday.

In the FTSE 250, Clarkson shares hit their lowest level in three years after the shipping services provider warned profit in 2016 will be "materially lower" year-on-year as it continues to face challenges in its key markets.

Clarkson said the recent recovery in the oil price has driven the return of some activity in the company's offshore broking division, but it will take some time before a meaningful recovery is seen in the oil and gas industry.

Overall transactions in its broking arm have increased, Clarkson said, but the fall seen in freight rates and asset values has hit revenue. This, combined with quiet capital markets and weak investor confidence, has reduced activity in its financial division. The stock ended down 16% at 1,850.00p, making it the worst performer in the FTSE 250.

Moneysupermarket.com Group closed down 11% after Barclays downgraded its rating on the price comparison site to Equal Weight from Overweight, saying the "layers of uncertainty" on the investment case for the company have been building in the past nine months, notably from increased competition in the price comparison space.

Add to this new concerns raised by the UK's decision to vote to leave the EU, and Barclays said it no longer has confidence on the positive momentum of the group's earnings.

Barclays also slashed its recommendation on Rightmove to Underweight from Overweight, saying that, while the bank is "structurally positive" on the property portal, the Brexit vote changes the company's story in the near term, meaning it is "time to face reality".

Given the uncertainty around house prices and transaction volumes as a result of the Brexit vote, Barclays said Rightmove shares now look expensive. Rightmove ended down 6.4%.

In the economic calendar Tuesday, the Caixin services PMI for China will be out before the London market open at 0245 BST. Later, there are Markit services and composite PMI readings from a number of countries. France is at 0850 BST, Germany at 0855 BST, the eurozone as a whole at 0900 BST, and the US at 1445 BST. UK services PMI is at 0930 BST.

Elsewhere, eurozone retail sales at 1000 BST, the Bank of England's financial stability report is published at 1030 BST and US factory orders are at 1500 BST.

The highlight in the UK corporate calendar is a trading statement from housebuilder Persimmon. Housebuilders have been amongst the hardest hit by the referendum result due to uncertainty around the UK's economic outlook.

Also reporting trading statements are distribution company Connect Group, staffing services, outsourcing and training company Staffline Group, all-hours gym operator Gym Group and Young & Co's Brewery.

International Consolidated Airlines Group will issue June traffic statistics, while Polar Capital Technology Trust and chip designer Imagination Technologies Group reports full-year results and property regeneration company St Modwen Properties reports half-year results.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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