Housebuilders and supermarkets lead gains

Housebuilders were on the upside of the FTSE 100 for much of Friday, with some brokers turning less cautious on the sector than they have been in recent months.

Analysts at Canaccord Genuity reiterated ratings on three of the top movers, including Barratt Developments, Berkeley Group and Persimmon.

Analysts at Canaccord reiterated Berkeley’s ‘hold’ rating with a target price of 630p, indicating a potential upside of 23.2%. Berkeley’s ‘buy’ rating was reiterated with a target price of 4180p - a possible upside of 45.1% - and Persimmon’s ‘hold’ rating was reiterated with a target of 2170p, or a potential upside of 14.4%.

An earlier report from Liberum had the firm soften its previous cautious stance on the sector, having cited Brexit risks and the prime London market as behind the concern in November.

“Valuations across the sector are now much less stretched following a 13% fall since our November note and 17% from December highs,” said Liberum’s Charlie Campbell.

“We are still more cautious than most but upgrade Barratt and Persimmon to Hold and Redrow to Buy after underperformance.”

Campbell believes the sector would now rally on a Remain vote in the Brexit referendum in June, but may fall further on a Leave vote if interest rates rise and GDP slows as a result.

“Recent weakness in Persimmon;s sales rates also needs monitoring,” he added.

Supermarkets were another sector looking greener as the week came to a close, with Sainsbury’s jumping after a rating upgrade to ‘buy’ from Deutsche Bank - a sign those in the City were warming to the grocer’s mammoth takeover of Argos.

“The share is priced for material downgrades in the near term, but is not reflecting the earnings accretion we expect from the Argos acquisition over the long term,” said Deutsche’s Niamh McSherry.

Tesco was also improved after Fitch upgraded its outlook on the recovering retail giant from ‘negative’ to ‘stable’.