CITY DASHBOARD FTSE drags as housebuilders sent tumbling

LONDON’s FTSE 100 tanked yesterday amid a sell-off in companies that are poised to come under pressure from the Bank of England continuing to hike interest rates to tame inflation.

The capital’s premier index slid 1.75 per cent to 7,615.22 points, while the domestically-focused mid-cap FTSE 250 index, more aligned with the health of the UK economy, collapsed 1.44 per cent to 18,931.16 points.

Traders stepped up their bets on how high Bank governor Andrew Bailey and the rest of the Monetary Policy Committee will raise interest rates after new inflation numbers smashed forecasts.

The rate of price increases slipped to its lowest level in a year and out of the double digits for the first time since last summer, down to 8.7 per cent from 10.1 per cent.

However, that was far above the City’s estimate of a drop to 8.2 per cent and the Bank’s projection to 8.4 per cent.

Core inflation – which was tipped to hold steady at 6.2 per cent – climbed to 6.8 per cent, suggesting a greater share of price pressures are being driven by domestic factors.

Those upside shocks prompted mar-

YOUR ONE-STOP SHOP FOR BROKER VIEWS AND MARKET REPORTS

Best Of The Brokers

To appear in Best of the Brokers, email your research to notes@cityam.com kets to raise the chances of the Bank sending borrowing costs to a peak of 5.5 per cent, which would be their highest level since December 2007.

Stocks sensitive to interest rate changes dragged the FTSE 100 lower.

Housebuilders tumbled on fears over whether demand for property can hold up after further interest rate increases.

Persimmon shed 5.52 per cent, Taylor Wimpey lost 4.55 per cent, Berkeley fell 4.28 per cent and Barratt Developments dropped 3.56 per cent.

Michael Hewson of CMC Markets UK said:

“Housebuilders have been hammered on the back of today’s hotter-than-expected inflation numbers for April. The sharp rise in core CPI has prompted markets to project the prospect of another 100bps of rate rises from the Bank of England, sending gilt yields to their highest levels since October last year.”

The pound initially gained ground on the US dollar on higher rate expectations, but then dropped sharply by around 0.35 per cent.

Gilt yields soared, with the rate on the two-year government bond up as much as 35 basis points. Yields and prices move inversely.

Oil prices were up two per cent.

Close Brothers’ trading update yesterday showed that its performance was stabilising after a poor start to the year. Analysts at Peel Hunt said “whilst overall current momentum remains sluggish, we think the share price reflects some issues which are now largely historic”. It kept its ‘hold’ rating with a target price of 977p.

Gambling software development company Playtech reported continued strong trading and that it now expects ebitda to be ahead of consensus. “While growth rates are indicated to slow during the year, there is a lot to like about Playtech,” analysts at Peel Hunt said. It reiterated its ‘buy’ rating and set a target price of 800p.

FTSE FALLS “If concerns about the global outlook weren’t sufficient with the China recovery story looking increasingly flaky, we now have the increasingly loud sound of the debt ceiling deadline clock, and the continuing impasse between US policymakers finally attracting the attention of financial markets. We’ve seen weakness across the board with heavy falls in the DAX, FTSE 100 and CAC 40, with the FTSE 100 falling below its April low and to its lowest levels in six weeks.”

FTSE 250 oil and gas firm Tullow Oil maintained its 2023 production forecast at its AGM yesterday as its key oil field continues to deliver. Analysts at Peel Hunt held the firm’s 80p target share price and ‘buy’ rating.

MICHAEL HEWSON, CMC MARKETS