London’s FTSE 100 index ended Friday in the green on a quiet results day, as investors were subdued by UK house prices dropping before housebuilders report next week.
The capital’s premier blue-chip index stayed at around half a per cent up after the open, and ended nearer 40 per cent, with Johnson Matthey being the biggest riser.
By close FTSE 100 was on 7,473.00 points, up 0.46 per cent going into the weekend.
The British chemicals maker was up more than 14 per cent up by 9am, after the New York-based investment arm of Standard Industries doubled its stake in the firm. It ended the day at just over 10 per cent.
Earlier in the week, the company joined the FTSE 100 in its latest shake-up.
Direct Line’s shares were also down more than two per cent this by the close, following news it had agreed to pay redress to customers after admitting an error in the calculation of new insurance rules, which meant it overcharged customers by some £30m.
Meanwhile, Nationwide’s housebuilding index published this morning showed house prices were down 0.8 per cent in August, and growth had slowed to 2009 levels.
At the open, this damaged investor confidence in housebuilder Persimmon, which just dropped out of the index this week.
This comes before three major housebuilders, Berkeley, Barratt and Vistry, prepare to report next week, as investors watch very closely.
All three have warned about the impact of interest rates on mortgages, and demand for new homes, in addition to recent rule changes about the environment, pushed through by Michael Gove.
Following the sharpest year-on-year decline in house prices for 14, years, Nationwide chief economist Robert Gardner said: “The softening is not surprising, given the extent of the rise in borrowing costs in recent months, which has resulted in activity in the housing market running well below pre-pandemic levels.
Andrew Wishart, senior property economist at Capital Economics, said: “With mortgage rates set to remain between 5.5% and 6.0% for the next 12 months, and second-hand supply on the market becoming less tight, we think the August data marks the start of a significant further drop in house prices.
The FTSE 250, which is more aligned with the UK domestic market, was broadly flat this morning at around 0.06 per cent, before dropping into the red in the afternoon. It ended the day almost 0.3 per cent down, with TUI the biggest faller, down nearly four per cent.
At 1pm UK US payroll figures were released, with a slight increase in unemployment announced. More jobs were created and wages stabilised, as analysts said it made it more likely the Federal Reserve would not hike interest rates again.
Yesterday, the FTSE 100 was in the green for most the day as it went on one of its longest winning streaks for a while, but finished in the red. Investors appeared to remain subdued amid concern over the prospect of inflation remaining high, and the prospect of more interest rate hikes by the Bank of England.
Its chief economic Huw Pill said yesterday the central bank wasn’t done yet potentially, and it would need to remain hot on keeping inflation down, saying there’s “no room for complacency.”
Many therefore looked towards what the Federal Reserve will be doing when it makes its next rate decision.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “There’s growing hope that interest rates are going to remain in their current position, rather than rise, at the next meeting,
“There’s also an argument to say that we’ve only just started restrictive cuts, everything else has been playing catch up to deal with inflation, so if heat is to come out the economy, cuts may be needed.
“There’s a disconnect between economic reality and interest rate expectations at the moment, which could lead to some disappointment on the markets.”
Meanwhile, China was in focus after Caixin figures revealed activity in the country’s manufacturing sector unexpectedly grew in August, to 51.0 from 49.2, coming in above the 50.0 that separates contraction from expansion.
Wang Zhe, senior economist at Caixin Insight Group, said: “In August, the manufacturing sector showed overall improvement. Apart from sluggish exports, the gauges for supply, total demand, and employment were all in expansionary territory.”
AJ Bell investment director Russ Mould said: “What supported the FTSE 100 in particular was news of more Chinese stimulus, which helped break a losing streak for China’s mainland indices and lifted UK-listed stocks with exposure to the world’s second largest economy – most notably the miners.”
He added that “UK house price data from Nationwide was predictably gloomy. While the supportive supply and demand dynamics in the UK have spared the property market from complete collapse, the rapid increase in borrowing costs has started to shake its foundations.
“Estate agents, housebuilders and anyone with a mortgage will be praying the Bank of England gives signs it is close to the end point of rate increases when it meets on 21 September.