Persimmon shares fell to a two-year low due to planning delays and rising home construction costs.
The FTSE 100 construction index fell 5 percent, or 92.5 pence, to 1,772.5 pence, its lowest level since the first weeks of the pandemic, after it said it sold 6,652 new homes in the six months to the end of June, compared with up from 7,406 in the same period a year ago.
Chief executive Dean Finch said the industry faced “significant ongoing challenges”, noting the group faced delays in the planning system as well as “disruptions” in supply chains and shortages of materials and labour.
Housebuilder Persimmon fell 5% after it said it sold 6,652 new homes in the six months to the end of June, compared with 7,406 in the same period a year ago.
But Finch said half-year profits would still be “modestly above” his expectations as a result of “strong demand” and rising property prices. However, the forecast failed to prevent the share price from falling.
Builders such as Persimmon cashed in during the pandemic, when then-Chancellor Rishi Sunak introduced stamp duty, and higher demand for spacious homes during the lockdown led to a surge in demand, sending prices soaring.
However, there are concerns that the market’s momentum could stall as rising interest rates and a cost-of-living crisis erode household savings.
“Builders have had to work hard to stay ahead of inflationary pressures and Persimmon’s latest update suggests they are finally catching up with the industry in material terms,” said AJ Bell chief investment officer Russ Mould.
He added that while Persimmon’s strong balance sheet allows it to buy more land and pay dividends to investors, the hit to earnings could be “significant” if the housing market starts to cool.
The FTSE 100 rose 1.1%, or 81.31 points, to 7,189.08, while the FTSE 250 added 1.5%, or 281.05 points, to 18,875.53.
Stock watch – Novacyt
Shares in Novacyt fell to their lowest level in more than two years after the company warned of a sharp decline in business.
The maker of Covid-19 tests reported revenues of £16.5m for the six months to the end of June, well below the £52.2m it made the previous year.
If the drop in demand for Covid-19 products continues, Novacyt predicted full-year revenues of £25m, down from previous forecasts of £35m to £45m.
Shares fell 25.7 percent, or 38.2 pence, to 110.5 pence.
Markets continued to rally after a recent sell-off amid hopes that central bankers will get more serious about fighting inflation after minutes of the Federal Reserve’s meeting showed it will continue to raise interest rates sharply in the US.
“Unconditional inflation is still seen as a demon that threatens economic stability around the world, and while sharp slowdowns and recessions may be the result, the attitude that it is now better to go hard and fast to prevent further price spirals is largely welcomed , Hargreaves Lansdown analyst Suzanne Streeter said.
Shares also shrugged off political turmoil in Westminster as Prime Minister Boris Johnson stepped down as Tory leader.
Mining stocks were among the blue-chip leaders, with Anglo American up 7.1 percent, or 187p, to 2,816p, Glencore up 6.1 percent, or 24.8p, to 433.25p , Antofagasta rose 7.4 per cent, or 76.5p, to 1,116.5p and Rio Tinto added 3.7 per cent, or 172.5p, to 4,860p.
Banks also rose amid expectations of higher interest rates. Standard Chartered jumped 3.3 percent, or 18.8 points, to 597, NatWest rose 3.4 percent, or 7.1 points, to 218.3, Barclays rose 2.8 percent, or 4 .16 points, to 151.02, Lloyds added 2.4 percent, or 1 pence, to 42.3 pence, and HSBC added 3.3 percent, or 16.9 pence, to 535.6 pence.
Iron ore miner Ferrexpo said production fell by more than a quarter in the three months to the end of June due to the ongoing war in Ukraine.
Sales in the first half of 2022 also fell 21 percent to 4.4 million tons due to logistics disruptions.
But shares rose 1.8 percent, or 2.2 pence, to 122.4 pence as investors appeared to be buoyed by the fact that production continued despite the conflict.
Mediclinic jumped 7.7 percent, or 34p, to 476.2p after it backed an increased takeover bid from a consortium backed by its biggest shareholder Remgro, which offered 504p a share, valuing the group at 3, 7 billion pounds.
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