Awful news about the American housing market fanned fears for economic recovery and thumped Wolseley, the world’s biggest distributor of building materials.
Although the company is based in Leamington Spa, nearly half its sales are derived from across the Atlantic. The shares fell 81p to £14.81 yesterday, in the steepest fall on the Footsie, after sales of new homes in the United States plunged by almost a third to 300,000 in May. The figure was the lowest since the survey by the National Association of Realtors started in 1963. Analysts had expected the fall to be a much more modest 14 per cent.
Disappointment about the American housing market heightened fears of a double-dip recession and unsettled stock markets worldwide. In London, the FTSE 100 retreated 68.46 points to 5,178.52.
Concern about the American economy, coming hard on the heels of a more sober assessment of China’s promise to relax the ties between its currency and the dollar, dented commodity prices and hurt resource companies.
Losses were limited by hopes that a leadership challenge to Kevin Rudd, the Australian Prime Minister, could lead to a softening of the country’s new resources super-tax.
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But it remained a difficult day for the miners. Rio Tinto shares fell 55p to £33.90 after a report that the Government of Guinea had threatened to take away part of the company’s Simandou iron ore concession.
Others in the sector — Xstrata, which fell 30p to £10.18, and Lonmin, down 54p at £16.37p — gave ground as Morgan Stanley trimmed its target prices for the shares.
Losses were almost as steep for Smith & Nephew, the medical devices company, which fell 16½p to 646½p after it lost a round in its long-running court battle with KCI, an American rival, over the patents on one of its wound-care products.
Investors continued to pick over Tuesday’s Budget for likely winners and losers. Two AIM companies may be in line to benefit from the Chancellor’s promise to resolve the future of the Tote, more than a decade after a sale was first mooted. Potential bidders for the state-controlled bookmaker and pool-betting monopoly include Praesepe, the operator of amusement arcades and bingo halls, 0.125p lower at 6.875p. Gala Coral, owner of the Coral betting shop chain. is another potential bidder. However, Gala is interested only in the Tote’s betting shops and would probably look to offload the pool betting monopoly to Sportech, the football pools operator, which rose 3p to 45½p.
Otherwise, takeover talk was thin on the ground, with many traders repairing to hostelries for the afternoon to watch football.
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Northumbrian Water was chased 4¼p higher to 394¼ after a rumour that a sovereign wealth fund from the Middle East might be mulling a bid.
Nighthawk Energy ticked ½p higher to 25p amid speculation that Macquarie, the Australian investment bank, had found four potential buyers for the oil company’s half of the Jolly Ranch project in Colorado. The rumour refused to lie down that Dana Petroleum, 30p higher at 71p, had caught the eye of OMV, of Austria. Goldman Sachs also gave the shares a big push this week.
Asos, the internet fashion group, advanced 30p to 860p amid speculation about a drive into America.
Halfords rose 10p to 550p, buoyed by confirmation from David Wild, its chief executive, that he was looking to buy more companies and that these would be bigger than Nationwide Autocentre, the independent car servicing and repair operator that Halfords swallowed for £73.2 million this year.
Sales on the high street may not have improved quite as much as economists had hoped this month, but retailers were still optimistic — at least, they were according to the CBI, the employers’ group. Its survey, combined with relief that the VAT rise to 20 per cent would not come into force until January 4, cheered the sector. Marks & Spencer rose 2½p to 351p, while DSG International was steady at 27½p ahead of annual results today.
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Third Quad Capital, the software group run by Andrew Monk, the former head of Blue Oar and Oriel Securities, advanced 0.085p to 0.56p on AIM. The shares were buoyed by news of improved fortunes during the first six months of this year and by a deal with DSG to bundle its office software — which aims to rival Microsoft Office — with Norton’s security software sold in Dixons.
Nautilus Minerals, which is exploring the sea floor for copper and gold, unveiled the results of a study that indicated that its Papua New Guinea project could operate at costs competitive with traditional mines deep underground. Nautilus, unchanged at 94p, points out that, in sea floor mining, equipment can be floated to successive sites without significant additional capital investment.