UK housebuilders rise sharply on hopes for mortgage support

UK housebuilders rise

The FTSE 100 index 1.4%, at 6,577.82, the FTSE 250 index advanced 1.5%, at 21,234.84, and the AIM All-Share index gained 0.6% at 1,190.73

London stocks opened higher on Monday as US bond markets stabilised, while housebuilders rose sharply as a mortgage guarantee scheme is expected to be unveiled in this week’s budget statement.

The 10-year US Treasury note yield was down 1.4% Monday morning from 1.5% late Friday, further narrowing from one-year highs reached on Thursday.

The FTSE 100 index rose 94.39 points, or 1.4%, at 6,577.82. The mid-cap FTSE 250 index advanced 323.06 points, or 1.5%, at 21,234.84. The AIM All-Share index gained 0.6% at 1,190.73.

The Cboe UK 100 index rose 1.6% at 654.50. The Cboe 250 added 1.5% at 18,904.85, and the Cboe Small Companies gained 0.3% at 13,187.82.

In mainland Europe, the CAC 40 in Paris added 1.6% while the DAX 30 in Frankfurt gained 1.3%.

Richard Hunter, head of Markets at interactive investor, commented: There has been a pause for breath after the bond market sell-off stabilised, although inflation concerns remain near the surface. Those fears of inflation have certainly not gone away but attention has shifted back, perhaps temporarily, to the immediate positive drivers which could propel a strong economic rebound.

In the FTSE 100, housebuilders were among the best performers amid hopes UK Chancellor of the Exchequer Rishi Sunak will unveil a mortgage guarantee scheme in Wednesday’s budget to help first-time buyers (FTBs) with small deposits get on the property ladder.

Taylor Wimpey was 5.2% higher, Barratt Developments added 4.8%, Persimmon was 5.3% higher and Berkeley Group gained 3.6%. Property portal Rightmove added 3.5%.

Midcap peers Bellway, Vistry Group and Redrow were up 4.7%, 4.5% and 4.3% respectively.

Analysts at Jefferies said: The government’s continued focus on ‘Generation Buy’ we see as a positive. We remain unconvinced by the potential re-emergence of the Help to Buy mortgage guarantee. However, testing new policies while Help to Buy still has 2 years to run, and with what looks like a pipeline of plans, we believe de-risks the longer term demand profile for the sector. Our top picks of the volume housebuilders remain Persimmon and Taylor Wimpey.

Sunak is under huge pressure to continue emergency support packages to prevent job losses and business closures, but has said he plans to “level with people” during his Commons speech. On Sunday, the chancellor indicated he will extend emergency support packages, such as the furlough scheme due to expire at the end of April, as the coronavirus lockdown is unwound over the coming months.

However, the chancellor issued a warning about the scale of the damage to public finances caused by the pandemic, saying the belt-tightening to pay for pandemic expenses may extend for years. He told Sky News’ Sophy Ridge on Sunday: This is going to take time to fix.

Pennon Group was up 3.6% after Barclays raised the utility to Overweight from Equal Weight.

At the other end of the large-caps, Bunzl was the worst performer, down 3.3%, as the distribution firm said it does not expect large pandemic related orders to repeat in 2021.

For 2020, revenue was GBP10.11 billion, up 8.4% from GBP9.33 billion in 2019, and pretax profit was GBP555.7 million, up 23% from GBP453.3 million.

Bunzl raised its dividend for the year 5.5% to 54.1 pence from 51.3p paid out the year before, as the company hailed its 28-year track record of consecutive annual dividend growth.

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