It was a hammering that the Footsie’s housebuilders could have done without. Figures showing the construction industry expanding at its slowest pace in more than two and a half years were bad enough, but then an American investment bank questioned the very foundations of the London property market.
Morgan Stanley warned that new-build high-end residential prices could fall by 10 per cent to 20 per cent this year. That sent a shudder through the sector.
The broker downgraded Capital & Counties, the company behind the regeneration at Earls Court, for the second time since August, this time to “underweight”. The broker said that Capco had not made progress in selling flats at the area’s Lillie Square site for three months, despite offering prospective buyers discounts to cover stamp duty costs.
“Affordability is an issue, we believe, but that is not the only reason,” Morgan Stanley said. “Lower demand from overseas investors, Brexit risk and UK buy-to-let reforms matter also.”
With the government having targeted buy-to-let landlords in recent economic announcements, investors are wary of any further pain from the chancellor in the budget this month.
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Also weighing on housebuilder shares were those closely watched construction figures, which fell to a ten-month low last month. Not surprisingly, then, the industry led the FTSE 100 lower, with Berkeley Group, the upmarket London housebuilder that has been targeted by hedge funds, the second-biggest faller, sliding 128p to £31.18.
Short-sellers are also betting against Capco, which fell 5¼p to 327p on the FTSE 250. Wellington Management built a 0.93 per cent position last week, according to the latest regulatory filings. Persimmon fell 70p to £21.44, Barratt Developments declined 16½p to 578p and Taylor Wimpey lost nearly 5p to close on 182¼p.
The FTSE 100 ended broadly flat, off 5.82 points at 6,147.06, ending a four-day winning streak after hitting 6,194 earlier in the session.
Badly received corporate trading updates also weighed. Intertek was the biggest faller, down 139p at £28.65, after the testing and standards group swung to an annual loss of £307.7 million. ITV fell 8¾p to less than 241p as investors overlooked full-year profits of £843 million and a 10p special dividend, focusing instead on a cautious first-quarter outlook on advertising revenues.
Stemming the Footsie’s falls were beaten-up stocks exposed to China’s slowing growth after Beijing moved to stimulate its economy this week. Anglo American, the biggest riser on the big board, climbed 32¾p to 524p, Standard Chartered rose nearly 23p to 454¾p and Aberdeen Asset Management added 14½p to 261¾p, although that bounce was too late to stave off its relegation to the FTSE 250.
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Aberdeen will be joined in the mid-cap index by Sports Direct, up 9½p at 419¾p, Hikma Pharmaceuticals, which fell 41p to £17.74, and Smiths Group, the engineer exposed to the low oil price, off 7p at 998p.
Promoted to the top tier were Wm Morrison, up 2¼p at 205¼p, Informa, 3½p lower at 698p, Paddy Power Betfair, which slipped 200p to £10.35, and Mediclinic International, which rose 13p to 895½p.
Those falling out of the FTSE 250 included Poundland, down 11¼p at 170p, which also announced the retirement of its chief executive.
Lithium lights up Bacanora
Investor optimism over commodities may not be at its highest, but the growth in electric vehicles and the investment pouring into creating energy storage is predicted to lead to a big increase in demand for lithium carbonate, which is used in batteries.
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Today Bacanora Minerals will unveil the results of a pre-feasibility study for its Sonora lithium project in Mexico. It reckons that it will need $240 million in debt and equity to build a world-class mine that will be among the lowest-cost big producers in the world. It hopes it can get the mine into production by 2019, pipping other projects to the post.
Bacanora reckons that it can deliver lithium to the market at about $2,750 a tonne, compared with a present market price of about $6,000 a tonne, or more. The company raised equity before Christmas, with M&G Investments taking a 10 per cent stake. The shares rose 2p to 74p yesterday.
The biggest stake-holder, with 17 per cent, is Rare Earth Minerals, which also owns a stake in some of the underlying concessions in the Sonora project. However, most of the early value in the project will be from licence areas entirely controlled by Bacanora.
Wall Street report
As the oil price stabilised late in the day, so Wall Street staged a light late rally, enough to take indices into positive territory at the end of what was a muted day on the markets. The Dow Jones industrial average rose 34.24 points to 16,899.32