London close: Stocks slip as Barratt, Redrow announce merger

London's stock markets finished in the red on Wednesday, as investors digested fresh house price data as well as news of a big merger in the housebuilding sector.

The FTSE 100 dropped 0.68% to 7,628.75 points, while the FTSE 250 saw a decrease of 0.35% to settle at 19,104.53 points.

In currency markets, sterling was last up 0.18% on the dollar to trade at $1.2621, while it managed a modest increase of 0.1% against the euro to change hands at €1.1726.

“The seesaw battle going on in the FTSE 100 swung the way of the bears today,” said IG chief market analyst Chris Beauchamp.

“Barratt Developments slumped on news of its acquisition of rival Redrow, and a poorly-received update from Sainsbury’s hit supermarket shares.

“Despite the index’s relative cheapness, it remains firmly unloved, and languishes well off its record highs even as its peers in Europe and the US continue to look well-placed for more gains.”

Beauchamp added that the S&P 500 took its turn in hitting a new record high during the afternoon, though the Nasdaq 100 rapidly followed suit, eking out a new peak on the open.

“Despite warnings of an imminent correction, US stocks remain in a powerful uptrend.

“Even a more cautious Fed hasn’t derailed Wall Street, and so far the best argument for a pullback appears to be that one is overdue.

“Perhaps this is true, but such things need a decent catalyst, and at present one refuses to appear.”

House prices rise further in January, German industrial output falters

In economic news, the UK housing market continued its upward trajectory in January, with house prices climbing for the fourth consecutive month.

According to data from lender Halifax, prices jumped 1.3% on a monthly basis, following a 1.1% increase in December.

On an annual basis, prices jumped 2.5% in January, marking the highest yearly growth since January last year.

The average price of a home in the UK now stood at £291,029, up from £287,244.

“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,” said Kim Kinnaird, director at Halifax Mortgages.

“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.”

Kinnaird noted that the average deposit raised was now £53,414 - around 19% of the purchase price.

“It’s not surprising that almost two-thirds 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.”

Meanwhile, in Germany, industrial production faltered more than anticipated in December, raising concerns about a potential downward revision to fourth-quarter GDP.

Industrial output slid by 1.6%, far surpassing expectations of a 0.4% decline, following a 0.2% fall in November.

Notably, the chemical industry experienced a severe setback, with production plunging by 7.6% on a monthly basis, while construction saw a 3.4% decline.

However, there was a glimmer of hope in the automotive sector, which witnessed a 4% increase in production.

In a significant development from China, reports emerged earlier that the head of the country's stock market regulator had been replaced.

Yi Huiman, who served as the chair of the China Securities Regulatory Commission for around four years, was removed from his post, according to the state-controlled Xinhua News Agency.

He was succeeded by Wu Qing, a former chair of state-owned bank ICBC with prior experience at the CSRC and as head of the Shanghai Stock Exchange.

The unexpected change in leadership came as Beijing aimed to address the recent downturn in the country's equity markets, with Shanghai's CSI 300 seeing an 18% loss over the past year and Hong Kong's Hang Seng Index shedding 24%.

Housebuilders in focus, Sainsbury’s slides on cost-cutting news

On London’s equity markets, housebuilders were in focus after Barratt Developments announced an agreement to acquire competitor Redrow for £2.5bn.

The deal, which would see Redrow investors receiving 1.44 new Barratt shares for each of their own, saw Redrow shares jump 13.6%.

However, Barratt's slumped 5.47% as the merger news coincided with the release of its half-year results, revealing an 81% plunge in pre-tax profits to £95.2m and a 57% reduction in dividends to 4.4p per share.

Other players in the housing sector, including Taylor Wimpey, Persimmon, Bellway, and Vistry, also recorded gains, with Taylor Wimpey leading the pack with a 1.15% increase.

Elsewhere, Smurfit Kappa Group rallied 3.55% after reporting a drop in full-year earnings and revenue amid challenging demand conditions, but noted that volumes rebounded in the fourth quarter.

Packaging sector peer DS Smith also experienced a rise, closing 2.97% firmer.

On the downside, J Sainsbury shares retreated 6.06% after the grocery giant announced plans to overhaul its supermarkets, focusing more on food space in a bid to achieve £1bn in cost savings over the next three years.

Imperial Leather maker PZ Cussons suffered a significant decline of 16.41% after warning on profits and cutting its interim dividend by nearly half due to a substantial slide in the Nigerian naira during the first half.

Media group Future slid 7.38% despite stating that its overall performance remained broadly in line with expectations in the four months to the end of January.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,628.75 -0.68%
FTSE 250 (MCX) 19,104.53 -0.35%
techMARK (TASX) 4,414.46 -0.30%

FTSE 100 - Risers

Smurfit Kappa Group (CDI) (SKG) 2,972.00p 3.55%
Smith (DS) (SMDS) 281.10p 2.97%
Rolls-Royce Holdings (RR.) 322.90p 1.60%
Centrica (CNA) 135.20p 1.50%
Sage Group (SGE) 1,165.50p 1.39%
GSK (GSK) 1,672.60p 1.19%
Taylor Wimpey (TW.) 148.75p 1.16%
CRH (CDI) (CRH) 5,838.00p 1.07%
InterContinental Hotels Group (IHG) 7,642.00p 0.95%
Spirax-Sarco Engineering (SPX) 9,976.00p 0.85%

FTSE 100 - Fallers

Sainsbury (J) (SBRY) 258.90p -6.06%
Barratt Developments (BDEV) 501.00p -5.47%
Vodafone Group (VOD) 63.60p -3.97%
Antofagasta (ANTO) 1,697.50p -3.80%
Anglo American (AAL) 1,754.60p -3.73%
Tesco (TSCO) 280.00p -3.41%
JD Sports Fashion (JD.) 107.35p -3.07%
Legal & General Group (LGEN) 244.10p -2.94%
Endeavour Mining (EDV) 1,307.00p -2.32%
Prudential (PRU) 830.20p -2.24%

FTSE 250 - Risers

Redrow (RDW) 688.50p 14.75%
Darktrace (DARK) 358.80p 4.82%
Crest Nicholson Holdings (CRST) 218.80p 4.40%
Bakkavor Group (BAKK) 97.00p 4.30%
Virgin Money UK (VMUK) 158.15p 3.01%
Baltic Classifieds Group (BCG) 243.00p 2.97%
Bellway (BWY) 2,832.00p 2.83%
Hilton Food Group (HFG) 805.00p 2.29%
Safestore Holdings (SAFE) 804.50p 2.16%
UK Commercial Property Reit Limited (UKCM) 65.20p 2.03%

FTSE 250 - Fallers

PZ Cussons (PZC) 107.00p -16.41%
Babcock International Group (BAB) 426.60p -8.93%
Future (FUTR) 660.00p -7.38%
Rathbones Group (RAT) 1,548.00p -4.56%
Tullow Oil (TLW) 29.06p -4.54%
Hochschild Mining (HOC) 93.65p -4.49%
PureTech Health (PRTC) 188.00p -4.41%
FirstGroup (FGP) 160.60p -4.23%
Discoverie Group (DSCV) 736.00p -4.07%
Close Brothers Group (CBG) 478.80p -4.01%