London midday: Stocks turn lower; Barratt and Redrow announce merger

London stocks had reversed earlier small gains to trade lower by midday on Wednesday as investors mulled the latest Halifax house price data and a big M&A deal in the housebuilding sector.

The FTSE 100 was down 0.4% at 7,654.18.

Figures released earlier by Halifax showed that house prices rose in January for the fourth month in a row, as mortgage rates fell.

House prices were up 1.3% on the month following a 1.1% increase in December 2023.

On the year, prices rose 2.5% in January following a 1.8% jump the month before. This marked the highest annual growth since January 2023.

The average UK home now costs £291,029, up from 287,244.

Kim Kinnaird, director at Halifax Mortgages, said: "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. 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. For those looking to buy a first home, the average deposit raised is now £53,414, around 19% of the purchase price. It’s not surprising that almost two thirds (63%) 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."

In equity markets, housebuilders shot higher after Barratt Developments agreed to buy Redrow for £2.5bn.

Under the terms of the deal, Redrow investors will receive 1.44 new Barratt shares for their own stock which would leave them with 32.8% of the combined group and Barratt shareholders with the remainder.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "The economic winds have not been kind to the housebuilders and Barratt Developments and Redrow clearly believe they’ll be stronger together, giving the new combined company much bigger clout to capitalise on the structural need for housing in the UK."

Redrow surged, while Taylor Wimpey, Persimmon, Berkeley, Bellway and Vistry also racked up strong gains.

Barratt was sharply lower, however. News of the merger came alongside half-year results, which showed that pre-tax profits at Barratt plunged 81% to £95.2m and the housebuilder slashed its dividend by 57% to 4.4p a share.

Sainsbury’s lost ground after saying in a strategy update that it plans to overhaul its supermarkets to focus more on food space as it looks to cut costs by £1bn over the next three years.

Imperial Leather maker PZ Cussons tumbled as it warned on profits and cut its interim dividend by nearly a half as a result of a significant slide in the Nigerian naira in the first half.

Media group Future fell even as it said its overall performance has been broadly in line with expectations in the four months to the end of January.

On the upside, Smurfit Kappa rallied as the corrugated packaging company reported a drop in full-year earnings and revenue amid a "difficult" demand environment, but said that volumes returned to growth in the fourth quarter. Peer DS Smith also rose.

Market Movers

FTSE 100 (UKX) 7,654.18 -0.35%
FTSE 250 (MCX) 19,159.21 -0.06%
techMARK (TASX) 4,414.80 -0.29%

FTSE 100 - Risers

Smurfit Kappa Group (CDI) (SKG) 3,008.00p 4.81%
Smith (DS) (SMDS) 282.10p 3.33%
WPP (WPP) 792.80p 1.41%
Centrica (CNA) 134.65p 1.09%
Rolls-Royce Holdings (RR.) 320.90p 0.98%
Taylor Wimpey (TW.) 148.35p 0.88%
CRH (CDI) (CRH) 5,814.00p 0.66%
Informa (INF) 793.40p 0.63%
Spirax-Sarco Engineering (SPX) 9,948.00p 0.57%
Sage Group (SGE) 1,160.00p 0.56%

FTSE 100 - Fallers

Barratt Developments (BDEV) 487.50p -8.02%
Sainsbury (J) (SBRY) 265.60p -3.63%
Tesco (TSCO) 282.70p -2.48%
Legal & General Group (LGEN) 245.60p -2.35%
Vodafone Group (VOD) 64.75p -2.23%
JD Sports Fashion (JD.) 108.30p -2.21%
B&M European Value Retail S.A. (DI) (BME) 500.00p -1.85%
Anglo American (AAL) 1,791.00p -1.73%
Endeavour Mining (EDV) 1,315.00p -1.72%
Prudential (PRU) 835.00p -1.67%

FTSE 250 - Risers

Redrow (RDW) 677.00p 12.83%
Crest Nicholson Holdings (CRST) 221.00p 5.74%
Virgin Money UK (VMUK) 157.90p 3.30%
Bellway (BWY) 2,826.00p 2.61%
Grainger (GRI) 267.80p 2.61%
SDCL Energy Efficiency Income Trust (SEIT) 54.10p 1.88%
Balanced Commercial Property Trust Limited (BCPT) 78.40p 1.82%
Bellevue Healthcare Trust (Red) (BBH) 153.80p 1.72%
Baltic Classifieds Group (BCG) 240.00p 1.69%
Twentyfour Income Fund Limited Ord Red (TFIF) 108.80p 1.68%

FTSE 250 - Fallers

PZ Cussons (PZC) 106.00p -17.19%
Future (FUTR) 675.00p -5.99%
Redde Northgate (REDD) 342.00p -3.25%
Hochschild Mining (HOC) 96.00p -2.09%
IP Group (IPO) 49.55p -2.08%
Babcock International Group (BAB) 456.20p -2.06%
FirstGroup (FGP) 164.30p -2.03%
SThree (STEM) 420.50p -1.98%
Apax Global Alpha Limited (APAX) 152.00p -1.94%
Oxford Instruments (OXIG) 2,125.00p -1.85%