LONDON MARKET MIDDAY: Persimmon Results Inspire Housebuilder Rally

LONDON (Alliance News) - Investors appeared to shrug off another fall in oil prices midday Tuesday, with stocks trading higher, led by housebuilders after positive commentary from Persimmon about the UK housing market following the Brexit vote in June.

Persimmon noted that the result of the referendum had created increased economic uncertainty which it cautioned may cause a tightening of the availability of construction skills. The housebuilder said the vote may also reduce consumer confidence such that demand and pricing for new homes are hit.

Persimmon pointed to a "modest increase" in cancellation levels following the outcome of the vote, echoing earlier comments from FTSE 100-listed peer Taylor Wimpey and regeneration company Countryside Properties.

However, cancellations have now returned to normal levels, it said, and are slightly lower than the level seen a year earlier, adding that visitor numbers to its sites since the UK vote to leave the European Union are 20% ahead of the prior year.

The company added it had continued to closely monitor Brexit impacts, though said the overall shortage of housing supply in the UK and action taken by the government to adjust policy to provide support for the UK's economic performance should mitigate market disruption.

Persimmon was the best performer in the FTSE 100, up 4.7%. Fellow housebuilder Barratt Developments was up 3.6%, while Taylor Wimpey was up 3.3%, and Berkeley Group up 3.0%.

The FTSE 100 index was up 0.5%, or 35.53 points, at 6,864.07. The FTSE 250 was up 0.7% at 17,992.55, and the AIM All-Share was up 0.5% at 792.59.

In mainland Europe, the CAC 40 in Paris was up 0.7% and the DAX 30 in Frankfurt was up 0.9%.

Flash purchasing managers index readings for the eurozone showed the private sector in the single-currency bloc expanded at the fastest pace in seven months in August. The Markit composite output index rose unexpectedly to 53.3 in August from 53.2 in July. It was forecast to drop slightly to 53.1. A reading above 50 indicates expansion.

The flash services PMI climbed to 53.1 from 52.9 a month ago, higher than the expected to drop to 52.8. However, the manufacturing PMI fell to 51.8 from 52.0 in July, against the consensus forecast to remain unchanged at 52.0.

Following these results, flash manufacturing PMI are expected for the US at 1445 BST. There are also new home sales in the US at 1500 BST, at the same time as the Federal Reserve Bank of Richmond's manufacturing index and eurozone consumer confidence. After the London close are the American Petroleum Institute's crude oil stocks at 2130 BST.

Futures indicated a higher open on Wall Street. The DJIA and S&P 500 were pointed up 0.2%, and the Nasdaq 100 up 0.3%.

In London, oil major Royal Dutch Shell was amongst the handful of fallers in the FTSE 100, tracking the lower oil price. Brent crude was quoted at USD48.60 a barrel at midday Tuesday compared to USD49.35 at the London equities close on Monday. Shell 'A' shares were down 0.6% and 'B' shares were down 0.5%.

IG's senior market analyst Christ Beauchamp pointed out that the mild gains in equity markets may not last because of the fall in oil prices, along with further troubles for the dollar-yen rate and low volumes.

JRP Group, the result of a merger between annuities providers Just Retirement and Partnership Assurance, led the FTSE 250 gainers, up 18%, after saying trading has remained in line with its expectations and its merger is progressing to plan.

The company said trading in the quarter to the end of July was in line with its expectations in its defined benefit de-risking, individual guaranteed income for life and lifetime mortgages units. JRP added its Solvency II ratio at the end of June was around 130%, meaning it remains well-capitalised.

Shore Capital was encouraged with the positive commentary about trading in JRP's annuities business amid a difficult environment and reiterated its Buy rating.

"We view this as excellent news given some of the negative commentary in the market place over the impact of lower interest rates on the annuity markets," Shore said.

Hostelworld Group was up 6.9% after the hostel-focused online booking platform said it is on track to meet its expectations for the full-year despite uncertainty in the travel industry, reporting lower revenue but a narrowed pretax loss in the first half of 2016.

Industrial services provider Cape posted growth in revenue for the first half of 2016 but said its pretax profit sank due to a significant margin hit taken amid difficult conditions in its energy end-markets plus higher one-off charges booked by the company.

Cape said its UK business performed below expectations in the half due to weakness in the offshore North Sea and thermal coal power generation markets, plus a poor commercial performance on a contract the firm holds with US oil major ExxonMobil at Fawley. Asia-Pacific, however, outpaced expectations thanks to good project activity in Australia, South Korea and Singapore. The stock was down 3.2%.

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

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