The property sector was anything but hot after a resurgence in bond yields, which soared after the latest American inflation figures proved higher than expected, in turn raising doubts about when the US Federal Reserve will start to cut interest rates.
Rising yields have a direct impact on property owners because they make the cost of borrowing higher. They also serve to depress valuations as investors demand better results to match improving government bond yields.
All of which poured a liberal measure of cold water on Britain’s commercial property industry players. Safestore, the self-storage company, was among those hit worst, falling 22p, or 2.9 per cent, to 727p. IWG, the owner of Regus, the serviced offices brand, slipped 2½p, or 1.3 per cent, to 184½p, while Unite, the student halls group, lost 15p, or 1.6 per cent, to 922p and British Land retreated 6¾p, or 1.8 per cent, to 381¾p.
Other big commercial property landlords to be affected included Land Securities, which closed down 10½p, or 1.6 per cent, at 629p. Shares in Shaftesbury Capital, which owns a large part of London’s West End, were off 2p, or 1.5 per cent, at 139p, while Hammerson, the owner of shopping centres including the Bullring in Birmingham, shed half a penny, or 1.8 per cent, to 26¾p.
Rate-sensitive housebuilders were punished, too, amid concerns that mortgage rates could fall more slowly and delay a recovery in the housing market. Barratt Developments dropped by 9¾p, or 2.1 per cent, to 456p; Taylor Wimpey declined by 2p, or 1.4 per cent, to 130p; and Redrow lost 8½p, or 1.3 per cent, to 643p.
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Utility stocks were out of favour, as they often are when yields rise. Their reliable profits and dividends make them a decent replacement for gilts when yields slide, but when they rise income investors tend to favour bonds, seen as the ultimate defensive play. Thus shares in United Utilities dribbled 14¼p, or 1.4 per cent, down to 997¾p and National Grid, which operates Britain’s power and gas networks, gave up 11½p, or 1.1 per cent, to £10.21.
Miners were sold off as metals prices retreated, with Anglo American and Antofagasta falling by 46p, or 2.1 per cent, to £21.45½ and by 26p, or 1.2 per cent, to £22.43, respectively.
Having bobbed in and out of negative territory, the FTSE 100 managed to end the day in the green, closing up 26.42, or 0.3 per cent, at 7,961.21, still some way off its intraday highs. The FTSE 250, which was up more than 1 per cent before the US inflation data, pared most of its gains to finish 38.40 points, or 0.2 per cent, higher at 19,801.75.
Other stocks did enjoy an upbeat session. They included Tesco, which climbed 9½p, or 3.3 per cent, to 297p on the back of its stellar full-year results. Another riser was Shell, which picked up 40½p, or 1.4 per cent, to settle at a record high of £28.69 as oil prices firmed amid renewed uncertainty about the security of supplies from the Middle East.
Wizz Air was cleared for take-off as results from Delta Airlines beat forecasts for the first quarter. Delta is predicting that profits and revenues in the second quarter will again smash Wall Street’s expectations. Shares in Wizz advanced 44p, or 1.9 per cent, to 23.54, while International Consolidated Airlines Group , which owns British Airways, nudged up 1¼p, or 0.8 per cent, to 175½p.
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Treatt, which sells flavours fragrances to some of the world’s biggest food and drinks companies, enjoyed one of its best trading days as it pointed to improved trading in the second half, given its healthy order book and sales pipeline. Treatt’s shares ended the day 54p, or 13.4 per cent, higher at 458½p.
On Aim, Churchill China bounced off six-week lows to reach £11 having put on 90p, or 8.9 per cent. The ceramic products manufacturer increased its final dividend after it reported a 12.4 per cent rise in pre-tax profits to £10.8 million last year.
Drugs group joins exodus from Aim
Another day, and another company has announced that it intends to quit London’s junior stock market.
Joining the march of defections from Aim is e-therapeutics, a drug developer, which intends to delist its shares because of what it calls the “lack of institutional UK interest” in the company.
Ali Mortazavi, chief executive of the London-based business, which was listed on the Alternative Investment Market in 2007, said the decision had been reached after a capital-raising roadshow had “struggled to get sufficient engagement from the vast majority of the institutions who were approached, reflecting the risk appetite of the UK markets”.
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Mortazavi, 53, added that the board believed there could be “a far larger pool of capital available as an unlisted company as opposed to an Aim-listed one and that this situation is very unlikely to change in the near future”. It is exploring a future listing on the technology-heavy Nasdaq in New York, “where the large gap in the valuation of e-therapeutics compared to its US peers can hopefully be narrowed”.
The news came a day after after Orchard Funding Group, a finance business, said it was considering leaving Aim amid the “continued and escalating costs of a listing”. Redx Pharma, a biotechnology player, recently blamed liquidity constraints for its decision to cancel its Aim listing, while C4X Discovery, a drug researcher, and Byotrol, which makes disinfectants, are also walking away from the London market.
Shares in e-therapeutics, which have declined by more than 80 per cent since its initial public offering, were flat at 12½p.
Wall Street report
An unexpected rise in consumer prices pricked market confidence that there would be as many as three interest rate cuts this year and sent indices into the red. The Dow Jones industrial average fell 1.1 per cent, 422.16 points, to 38,461.51.
