Housebuilders are continuing to rally after last week's volatility, helped by a report over the weekend that UBS was working on a proposal to refinance some of the most troubled companies in the sector.
The idea would be that UBS, which acts for both Taylor Wimpey and Barratt Developments, would implement a wide-ranging placing of equity underwritten by major shareholders in preference to rights issues.
Kaupthing analysts commented: "This would be a faster and less value-destructive alternative which appears to have garnered some support amongst the major institutions, although the principle of pre-emptive rights may be an issue. The fact that the agenda is now turning to solutions rather than destruction is unlikely to be lost on the stockmarket, which perhaps can now see the basis for steadying the sector rather than trashing it."
So it has proved, for the moment at least. Barratt is up 14% at 99.5p, while Taylor Wimpey is ahead nearly 10% to 77.25p. Persimmon, Bellway and Redrow are all around 6% better.
Meanwhile Barclays seems to have calmed some nerves after the bank confirmed it was considering a share placing, reported to be around £4bn. Its shares have reacted well, up 20.5p to 338.5p.
But food producers have been hit by a negative note from UBS. The bank said: "We are concerned that the sector's current premium valuation is vulnerable to any disappointment. We are specifically concerned about volume growth slowing in the emerging markets (as consumers' purchasing power is eroded by food/fuel inflation) and margins coming under pressure in the developed world (as the companies react to any down trading by investing in price/promotion/mix).
"We do not anticipate a spate of profit warnings, but we do expect to hear increasingly cautious comments from managements, particularly as they start to look into 2009."
It has a sell recommendation on both Unilever, down 58p at £15.15, and Cadbury, 10p lower at 642p.
British Airways is also lower on a sell recommendation, this time from Goldman Sachs which has also cut its price target from 200p to 177p.
Goldman said: "BA remains very exposed to the UK consumer and the financial services industry and also may increase its stake in Iberia. It also has a large pension fund which has a deficit, making the equity extra sensitive to capital markets."
BA's shares are down 8.5p at 242p.
Overall, investors seem to be leaning towards the positive, with the FTSE 100 up 17.3 points at 5820.1.
