MARKET COMMENT: Housebuilders Lead UK Stocks Up On More Help-To-Buy

LONDON (Alliance News) - UK and European stocks are making gains Monday, while the price of gold has eased slightly from its six-month high, as global markets appear to take the expected result from a referendum in Crimea in their stride.

By mid-day Monday the FTSE 100 is up 0.4% at 6,555.92, the FTSE 250 is up 0.7% at 16,243.04, and the AIM All-Share is up 0.3% at 871.75.

A similar picture within major European markets sees the CAC 40 up 0.8% and the DAX 30 up 0.7%.

"Markets seem to be shrugging off initial risk following the weekend?s referendum in Crimea where over 90% of respondents opted for the semi-autonomous region?s secession from the Ukraine and annexation to Russia," said DailyFX analyst Ilya Spivak. "While an upsetting of the geopolitical status quo is typically treated as risk-negative by the markets because of the accompanying uncertainty, the referendum outcome was widely expected and so did not yield a sustained response from investors," the analyst said.

The price of gold, which been on the rise all year but accelerated further last week to a fresh six-month peak, has eased off a little Monday. After peaking at USD1,392.08 per ounce at the weekend, the precious metal is down slightly Monday at USD1,378.60 per ounce.

While markets appear relaxed about the situation for now, the EU issued a statement on Sunday stating that the vote was "illegal and illegitimate and its outcome will not be recognised". European and US politicians are said to be considering immediate sanctions against Russia, including travel bans and asset freezes, which could be announced at any time with potentially significant market impact.

"Gold?s recent price action to geopolitical tensions suggests it is still regarded as a safe haven asset. So, if and when some serious sanctions against Russia are announced then we could easily see another spike in the price of the yellow metal," says Forex.com analyst Fawad Razaqzada.

Eurozone February CPI has been revised lower, sending the euro slightly lower. Consumer prices grew at 0.7% year-on-year in February, slowing from 0.8% growth seen in January and missing economist expectations for an unchanged reading of 0.8%. The data is a disappointment given the preliminary reading of the data at the end of February was 0.8%.

After having risen above USD1.39 in early trade, the euro is off slightly after the data, currently trading at USD1.3885.

The CPI reading has received increased attention after Mario Draghi made clear last week that further policy easing was still an option being looked at by the European Central Bank. Although the headline rate fell from the previous month, Core CPI, which excludes energy prices, was confirmed at 1.0% year-on-year in February, up from 0.8% in January, in line with expectations. The ECB president has noted in recent press conferences that falling energy prices are likely to keep overall inflation anchored in the near term.

Within UK equities, six of the top ten FTSE 350 stock gainers are housebuilders Monday, following the weekend announcement from Chancellor George Osborne that the Help to Buy housing scheme is being extended by 4 more years. The scheme has been boosting housebuilding stocks since its introduction last year, but was only originally supposed to be in place for two years, but has now been extended until 2020.

Persimmon leads the FTSE 100 higher, up 5.2%. In the FTSE 250, Bovis Homes, Taylor Wimpey, Barratt Development, Bellway and Crest Nicholson are all big gainers, up 4.9%, 4.5%, 3.7%, 3.6%, and 3.4%, respectively.

While the scheme is undoubtedly positive for the housebuilders, its detractors say the scheme is fuelling a house price bubble, as evidenced by the latest reading of the housing market from estate agency Rightmove overnight that shows the average UK house price at its most expensive ever.

On a yearly basis, the Rightmove house price index posted a 6.8% gain during March, taking the average price up to GBP255,962. The average price in London, where concern over an asset class bubble are strongest, also increased to a new record high of GBP552,530.

The food and drug retailers are performing the worst, with Tesco leading the FTSE 100 fallers after receiving a ratings cut to Underperform from Merrill Lynch. The downgrade comes after the heavy falls seen across the UK supermarkets last week after Morrison's joined the sector price war. Sainsbury and Morrison are following Tesco lower Monday, down 1.3% and 1.1%, respectively.

Gaming company bwin.party is underperforming after being downgraded to Sell by Citi, which says the monthly filings of the New Jersey online gaming market show that bwin.party's potential market share is significantly smaller than first thought.

Vodafone shares are up 1.7% after the mobile Telecom giant announced a new acquisition that extends its reach into Europe - Spain's Grupo Corporative Ono for EUR7.2 billion.

Still to come Monday, the US New York Empire State manufacturing index will be released at 1230 GMT, followed by industrial production data at 1315 GMT.

By Jon Darby; jondarby@alliancenews.com; @jondarby100

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