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London open: Stocks edge up as Barratt, Redrow announce £2.5bn merger
London stocks edged up in early trade on Wednesday, with housebuilders in the black as Barratt Developments and Redrow announced a £2.5bn merger, and as investors mulled the latest Halifax house price data.
At 0820 GMT, the FTSE 100 was up 0.2% at 7,693.19p.
Figures released earlier by Halifax showed that house prices rose in January for the fourth month in a row, as mortgage rates fell.
House prices were up 1.3% on the month following a 1.1% increase in December 2023.
On the year, prices rose 2.5% in January following a 1.8% jump the month before. This marked the highest annual growth since January 2023.
The average UK home now costs £291,029, up from 287,244.
Kim Kinnaird, director at Halifax mortgages, said: “The recent reduction of mortgage rates from lenders as competition picks up, alongside fading inflationary pressures and a still-resilient labour market has contributed to increased confidence among buyers and sellers. This has resulted in a positive start to 2024’s housing market.
“However, while housing activity has increased over recent months, interest rates remain elevated compared to the historic lows seen in recent years and demand continues to exceed supply. For those looking to buy a first home, the average deposit raised is now £53,414, around 19% of the purchase price. It’s not surprising that almost two thirds (63%) of new buyers getting a foot on the ladder are now buying in joint names.
“Looking ahead, affordability challenges are likely to remain and further modest falls should not be ruled out, against a backdrop of broader uncertainty in the economic environment.”
In equity markets, housebuilders shot higher after Barratt and Redrow said they had agreed an all-share merger valuing the latter at £2.5bn.
Under the terms of the deal, Redrow investors will receive 1.44 new Barratt shares for their own stock which would leave them with 32.8% of the combined group and Barratt shareholders with the remainder.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “The economic winds have not been kind to the housebuilders and Barratt Developments and Redrow clearly believe they’ll be stronger together, giving the new combined company much bigger clout to capitalise on the structural need for housing in the UK.”
Redrow surged, while Taylor Wimpey, Persimmon, Berkeley, Bellway and Vistry also racked up strong gains. Barratt was in the red.
Smurfit Kappa rallied as the corrugated packaging group reported a drop in full-year earnings and revenue amid a “difficult” demand environment, but said that volumes returned to growth in the fourth quarter.
Sainsbury’s lost ground after saying in a strategy update that it plans to overhaul its supermarkets to focus more on food space as it looks to cut costs by £1bn over the next three years.
Imperial Leather maker PZ Cussons tumbled as it warned on profits and cut its interim dividend by nearly a half as a result of a significant slide in the Nigerian naira in the first half.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Smurfit Kappa Group Plc | +4.88% | +140.00 | 3,010.00 |
| 2 |  |
Smith (ds) Plc | +1.39% | +3.80 | 276.80 |
| 3 |  |
Wpp Plc | +0.95% | +7.40 | 789.20 |
| 4 |  |
Centrica Plc | +0.86% | +1.15 | 134.35 |
| 5 |  |
Diageo Plc | +0.79% | +23.50 | 2,995.00 |
| 6 |  |
Hiscox Ltd | +0.68% | +7.00 | 1,039.00 |
| 7 |  |
Direct Line Insurance Group Plc | +0.62% | +1.00 | 162.50 |
| 8 |  |
Rolls-royce Holdings Plc | +0.60% | +1.90 | 319.70 |
| 9 |  |
Taylor Wimpey Plc | +0.54% | +0.80 | 147.85 |
| 10 |  |
Kingfisher Plc | +0.51% | +1.10 | 218.40 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Barratt Developments Plc | -7.49% | -39.70 | 490.30 |
| 2 |  |
Sainsbury (j) Plc | -3.74% | -10.30 | 265.30 |
| 3 |  |
Tesco Plc | -2.17% | -6.30 | 283.60 |
| 4 |  |
Legal & General Group Plc | -1.75% | -4.40 | 247.10 |
| 5 |  |
Vodafone Group Plc | -1.63% | -1.08 | 65.15 |
| 6 |  |
Carnival Plc | -1.51% | -17.50 | 1,139.50 |
| 7 |  |
Fresnillo Plc | -1.29% | -6.60 | 504.40 |
| 8 |  |
Tui Ag | -1.29% | -7.00 | 536.50 |
| 9 |  |
Marks And Spencer Group Plc | -1.10% | -2.70 | 242.30 |
| 10 |  |
Prudential Plc | -1.08% | -9.20 | 840.00 |
US close: Stocks edge higher as investors digest earnings, Fed comments
US stocks were trading within a tight range on Tuesday but finished with minor gains, bouncing back after Fed-induced losses the previous session as bond yields surged.
With no major economic data due on Tuesday, market chatter was dominated by comments from Federal Reserve policymakers, who are doing their best to temper expectations of an imminent interest-rate cut. Meanwhile, a barrage of corporate earnings was keeping investors busy, with well-received results from DuPont, Palantir and Spotify.
The Dow closed up 0.37%, the S&P 500 rose 0.23% while the Nasdaq gained just 0.07%, with very little separating the day’s highs and lows as investor risk appetite remained modest.
Bond yields were pulling back, with the 10-year US Treasury yield down 6.6 basis points at 4.095%, after gaining 14 basis points on Monday following comments from Fed chair Jerome Powell who said the central bank was in no rush to cut interest rates. Powell said that the “economy’s in a good place” after resilient economic data over the past few months, but the Fed needs more confidence before taking any action.
Several Fed members echoed the same sentiment on Tuesday, with Minneapolis Fed president Neel Kashkari saying “we are not quite there yet”, and Cleveland Fed president Loretta Mester claiming there is “no need to rush” to loosen monetary policy.
In a speech in Ohio on Tuesday, Mester said: “It would be a mistake to move rates down too soon or too quickly without sufficient evidence that inflation was on a sustainable and timely path back to 2%.”
As markets continue look for more clarity from the Fed on the timing of potential rate cuts, Mester said she didn’t want to offer a projection of when the first move might come; instead vaguely suggesting that a cut could come sometime “later this year”.
“According to the CME’s FedWatch Tool, the May Fed meeting is now the favoured time for the first cut, although June seems more reasonable based on the Fed’s comments,” said David Morrison, senior market analyst at TradeNation. “In addition, the market is now pricing in rate cuts of between 100-125 basis points this year, down from 150 last week. Equities are still rising, based on the positive economic environment.”
DuPont and Palantir jump
Shares in chemicals giant DuPont rose over 7% after the parent company of brands including Kevlar, Tyvek and Styrofoam beat market expectations on profits and raised its dividend. Adjusted earnings per share for the fourth quarter stood at 87 cents, above the FactSet consensus forecast for 85 cents, while the dividend was lifted 5.6% to 38 cents.
Data analytics provider Palantir surged 31% after reporting that fourth-quarter revenues rose by a fifth to beat market consensus, citing strong demand for its AI product offerings.
Spotify was also performing well after the music streaming provider reported a 15% jump in paid premium subscribers despite the group’s price increases in the fourth quarter.
Also impressing the market with their results were Willis Towers Watson, Check Point Software Technologies, GE HealthCare Technologies and Coherent.
Wednesday newspaper round-up: HS2, CBI, mortgages
The cancellation of the northern leg of HS2 has raised “urgent unanswered questions” and the government does not yet understand how the £67bn high-speed railway will now function, according to a scathing report from parliament’s spending watchdog. The remaining London-Birmingham line will be “very poor value for money”, the public accounts committee of MPs said, with costs now forecast to significantly outweigh the benefits. – Guardian
The new president of the Confederation of British Industry has admitted that the Guardian’s revelations about sexual misconduct at the lobbying group were “an appalling shock” that tipped it into a “near-death experience”. Rupert Soames said the scandal had triggered an existential crisis, from which he is trying to rescue the organisation. – Guardian
The Bank of England has pushed the UK into recession by refusing to clearly communicate its plans to cut interest rates, top economists have warned. Britain fell into a recession at the end of 2023, according to estimates by the National Institute of Economic and Social Research (NIESR), as GDP fell by 0.1pc in part because of the Bank’s insistence high interest rates would not fall soon from their current 16-year high of 5.25pc. – Telegraph
A new Dutch-style mortgage lender is set to release fixed-rate mortgages where the rates will automatically reduce as borrowers repay them. April Mortgages, authorised by the Financial Conduct Authority in October, plans to offer loans to existing homeowners remortgaging and new buyers by the end of March. – The Times
Estimated energy output from wind farms should be subject to independent checking, according to MPs, after claims that operators overestimate production to reap financial benefits. Wind farm operators are often paid to switch off their turbines when generation outstrips demand to prevent the electricity grid from being overloaded. These curtailment payments are based on the amount of energy that a wind farm company says it will produce. – The Times
