London close: FTSE gains as pound weakens, housebuilders rally

London stocks closed higher on Tuesday as the pound weakened and as housebuilding stocks rebounded after the government released a strategy to solve the housing crisis.

The FTSE 100 finished the session up 0.20% to 7,186.22 points.

The pound weakened 0.30% against the dollar to $1.2432 as the greenback strengthened on growing expectations the Federal Reserve will hike interest rates earlier than expected.

Federal Reserve Bank of Philadelphia President Patrick Harker said in a speech on Monday that March was “on the table” for a possible rate hike, depending on the economic data that comes out between now and then.

Harker pointed to last week’s strong non-farm payrolls report and continued good news surrounding GDP growth.

Meanwhile, housebuilders Barratt Developments and Persimmon were among the top risers on the FTSE 100, rebounding from declines a day earlier when it was reported a white paper may reveal tighter policies for housebuilders.

The white paper -- titled Fixing Our Broken Housing Market -- was released on Tuesday and included plans for more affordable homes, including councils having to plan for their own needs. The paper suggested accelerating construction, encouraging institutional investment in the rental sector and protecting the greenbelt.

Housebuilder Bellway also rallied as it posted a 6.5% jump in housing completions in the six months to the end of January and said it expects to build 5% more homes this year.

The sector seemed to brush off data from Halifax which showed house prices in the UK fell 0.9% in January compared to a month ago to an average of £220,260, after a 1.6% surge in December. Compared to the same month a year ago, house prices gained 5.7% in January after a 6.5% increase in December.

Investors were also digesting disappointing data on UK retail sales.

January's BRC-KPMG retail sales monitor showed sales dropping 0.6% on a like-for-like basis, with total sales rising 0.1%.

The sector fared badly in comparison to the strong start last year, when LFL sales increased 2.6% and total sales 3.3%, while total sales were well below the three-month average of 1.1% and the 12-month average of 0.9%.

"With the signs pointing to upward pressures on shop prices given rising import costs, all eyes will be on the impact of inflation on consumer spending,” said British Retail Consortium chief executive Helen Dickinson.

“That said, retailers are a resilient and innovative bunch. They have become increasingly adept at responding to the challenging environment, and as a result the industry has been a key driver of recent UK productivity growth.”

Elsewhere on the corporate front, DCC's shares surged after reporting a strong third quarter profit and announcing a deal to buy Esso’s retail petrol station network in Norway as part of its plan to extend its presence in Europe.

Education publisher Pearson got a boost as Morgan Stanley raised its price target on the equalweight-rated stock to 615p from 550p.

Commercial laundry group Berendsen advanced as RBC Capital upgraded the stock to ‘outperform’ from ‘sector perform’ and lifted the price target to 950p from 900p.

On the downside, oil giant BP gushed lower after its fourth-quarter profits fell short of target and the company said cash flow will not increase in 2017 as it hikes its level of disposals and capital expenditure to return the business to growth in the medium term. A fourth-quarter underlying replacement cost profit of $400m resulted in a full year profit of $2.6bn, a 56% drop from the previous year.

Sector peer Royal Dutch Shell followed suit with its shares also in the red.

CRH was on the back foot as US peer Vulcan Materials missed fourth-quarter estimates, citing a fall in aggregates volumes of 3.5% in the quarter and a number of lingering issues such as volume weakness in coastal Texas, California and Illinois.

London Stock Exchange was also weaker as Deutsche Börse dismissed claims of insider trading hanging over its chief executive. LSE and Deutsche Börse submitted their revised merger plans to European competition regulators on Tuesday. Following talks with the European Commission, London Stock Exchange and Deutsche Börse directors hope to gain regulatory clearance for their proposed £21bn merger when officials report back on 3 April with the final results of a competition investigation.

Spectris was sitting lower as Peel Hunt downgraded the stock. “We continue to be fans of the model and its potential but ahead of the Finals (due on 14 February), we are moving our recommendation back to hold from add as we want to be able to assess the potential based on fact rather than expectation.”

Market Movers

FTSE 100 (UKX) 7,186.22 0.20%
FTSE 250 (MCX) 18,559.70 0.99%
techMARK (TASX) 3,313.58 0.90%

FTSE 100 - Risers

DCC (DCC) 6,735.00p 5.65%
Fresnillo (FRES) 1,566.00p 5.24%
Randgold Resources Ltd. (RRS) 7,435.00p 4.06%
Pearson (PSON) 667.00p 3.57%
Rolls-Royce Holdings (RR.) 700.50p 2.94%
Dixons Carphone (DC.) 313.40p 2.65%
Shire Plc (SHP) 4,561.00p 2.53%
Sainsbury (J) (SBRY) 266.20p 2.38%
Glencore (GLEN) 317.85p 2.27%
Antofagasta (ANTO) 836.00p 2.26%

FTSE 100 - Fallers

BP (BP.) 457.10p -4.08%
CRH (CRH) 2,745.00p -2.45%
Standard Chartered (STAN) 791.10p -1.56%
Royal Dutch Shell 'B' (RDSB) 2,249.00p -1.40%
easyJet (EZJ) 923.00p -1.02%
Royal Dutch Shell 'A' (RDSA) 2,154.00p -0.97%
London Stock Exchange Group (LSE) 3,139.00p -0.63%
Barclays (BARC) 226.05p -0.59%
Kingfisher (KGF) 333.10p -0.54%
Paddy Power Betfair (PPB) 8,515.00p -0.53%

FTSE 250 - Risers

Hochschild Mining (HOC) 271.40p 9.30%
Indivior (INDV) 352.70p 8.29%
FirstGroup (FGP) 111.20p 6.92%
Berendsen (BRSN) 904.00p 6.86%
Kaz Minerals (KAZ) 540.00p 5.47%
Ferrexpo (FXPO) 160.50p 4.83%
AO World (AO.) 160.00p 4.17%
Vedanta Resources (VED) 1,089.00p 4.11%
Acacia Mining (ACA) 457.30p 4.10%
TalkTalk Telecom Group (TALK) 168.30p 4.08%

FTSE 250 - Fallers

Millennium & Copthorne Hotels (MLC) 413.30p -3.48%
Tullow Oil (TLW) 295.30p -3.34%
Euromoney Institutional Investor (ERM) 1,062.00p -3.19%
Pets at Home Group (PETS) 193.90p -1.63%
Howden Joinery Group (HWDN) 391.80p -1.38%
Spectris (SXS) 2,432.00p -1.26%
Redefine International (RDI) 38.05p -1.09%
Softcat (SCT) 313.30p -1.01%
Hastings Group Holdings (HSTG) 227.40p -1.00%
NMC Health (NMC) 1,719.00p -0.98%