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THE TIPSTER

FRIDAY’S upbeat house price data from the Nationwide was well received by home owners, but it might only last for the short-term. Whether the upward trend in home values can be sustained for any length of time is clearly open to debate. The prospect of rising interest rates threatens to squash demand as mortgage repayments will be higher. This is worrying for the building industry, which has had a torrid time during the recession. Fears that demand for housing will stall has meant that stocks in the construction and materials sector are struggling to break higher from here. Indeed a break below the 2009 lows could now be on the cards leaving these companies lagging the overall index. The current IG Index price on the construction and materials sector is 3,352.42-3,367.56

The possibility of deep dividend cuts, rights issues and credit rating downgrades at the UK’s water companies were on the cards at the end of the last year when Ofwat, the water regulator, threatened to step in and dictate the price firms could charge customers. However, a somewhat lenient final ruling means firms have not been hit as hard as first feared. Indeed, Northumbrian Water’s shares rose 40p after the ruling but last week lost some of their gains. Will there be a recovery today when the company submits a trading update? ShortsandLongs.com has a rolling spread of 261.3p-262.2p.

Stocks in the pharmaceutical sector fell at the end of last week after a report suggested firms in the sector would abandon share buybacks and instead they would use any spare cash to cut debt this year. Drug-makers are also under pressure due to the issue surrounding some of their most lucrative patents. GlaxoSmithKline shares fell by more than 100p to around 1,210p on Friday – but will a trading update from the firm on Thursday arrest the slide? Spreadex has a March-based spread of 1,205.10p-1,213.00p.

On Friday, Marstons announced that trading over the last 16 weeks had been encouraging and in line with expectations. This was despite the poor weather in January, which discouraged pub-visits. The pub chain added that the outlook for the UK economy remains uncertain, and the impact on consumer confidence of the VAT rise and future tax hikes increases the challenges facing the sector in the year ahead. The group said it was nevertheless encouraged by the progress made so far during the recession and is well positioned for the current economic climate.

At 89p, Marstons shares have remained more or less static since early December. The shares retreated after reaching year highs of 190p last year. The pub group’s recent rights issue means that it has a well stocked war-chest for further acquisitions, which could help boost growth. A short-term target of 97p is worth watching, according to Galvan, the derivative trading company. IG Index has a June spread of 89.69p-90.60p
KATHLEEN BROOKS