It's a tale of two housebuilders this morning with Barratt Developments pleasing the market, Redrow less so.
Barratt has climbed 1.75p to 156.25p after it said it had seen signs of stability in the housing market and - echoing comments from Persimmon earlier in the week - would not be writing down its landbank again to any great degree. In a trading update it also revealed it had cut its debt - the legacy of its takeover of Wilson Bowden - from £1.42bn to £1.28bn. Like Persimmon, however, it warned that there would be no real improvement in trading without a recovery in the availability of mortgage finance.
Like many other companies before it, Barratt is also closing its final salary scheme.
Charlie Menegatos, senior trader at derivatives broker Accendo Markets, said:
"The statements from both [Barratt and Persimmon] indicate a sea change in the property and housebuilding sector, added to which the recent successful Aim flotation of Max Property Holdings also shows investors seeing value and returning to the sector."
They are not returning to Redrow, however. Its shares are down 0.5p to 212p after it warned results would be at the lower end of expectations. And analysts at KBC Peel Hunt advised taking profits on both Barratt and Redrow. They said:
"We still hold that the housing market has a fair way to fall and that the sector is overvalued.
"A rights issue is almost certainly needed [for Redrow] if there is any real chance of a major reversal. Still the most over-valued in the sector and we remain a seller with a target price of 144p."
Overall, the market is marking time ahead of the Bank of England's statement at noon, which is expected to leave interest rates on hold but could extend the programme of quantitative easing. The FTSE 100 is 21.15 points higher at 4161.38.
Owen Ireland, sales broker at ODL Securities, said:
"World markets have traced an arc over the last four months in the same way that a ball thrown into the air would. The dilemma we have now is whether the actual underlying forces of the market can pick the ball out of the air and renew its trajectory upwards, or whether the gravity of the bears is enough to pull the ball down to earth with a thump."
Legal and General has recovered after yesterday's falls, up 3.26p to 53.94 as concerns about insurers' capital positions faded.
Anglo American added 67.5p to £16.31 following reports its shareholders were not happy with the proposed nil-premium merger from Xstrata, up 9.9p at 597p. Investors have taken that to mean Xstrata will have to come back with a higher offer to win the day.
