Housebuilders a Solid Foundation for FTSE 100

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Thursday, April 23:  The FTSE 100(+0.97%) saw a rebound from early losses, as oil prices rose lifting oil majors, and a return to work for the construction sector lifted housebuilders. On the evidence of the market close, investors took very weak economic data in their stride. The IHS Markit/CIPS Flash UK Composite Purchasing Managers’ Index (PMI) fell to a record low of 12.9, down from 36.0 in March and far below the weakest forecast of 31.4 in a Reuters poll of economists.

Vistry(formerly Bovis Homes) jumped 11.49% in trading as it announced plans to restart construction work in the next two weeks. Taylor Wimpey(+9.40%) also saw gains as it announced that it had continued to sell houses online during the lockdown, with solid year-on-year growth in orders. This sparked a rally in sector peers Barratt Development(+8.70%) and Persimmon(+8.37%).

Unilever(-1.79%) was one of the aforementioned updating the market with respect to Q1 earnings. Underlying sales growth was flat, as volume growth of 0.2% was nullified by price growth of -0.2% despite turnover 0.2% higher to €12.4bn, inclusive of a +0.6% impact from acquisitions net of disposals and a -0.4% impact from currency. Most major markets, outside of China saw normal sales patterns in January & February with Covid-19 impacting in March. Sales in China slowed significantly during the lockdown period, which began in January, whilst Europe & North American, noted the positive impact of household stocking in March. Due to the unknown severity and duration of the COVID-19 pandemic & varying containment measures on a country basis, management deem than they cannot reliably assess the impact across the business and therefore suspend prior guidance.

The UK Debt Management Office issued a statement on Thursday afternoon stating it would raise £180bn of bonds in the next three months, more than what had pencilled in for the entire fiscal year as the Treasury seeks to soften the blow of a coronavirus recession. In a prior statement, the DMO was planning to sell just £156.1bn of bonds in the 12 months from April. Taking into account this additional borrowing, the Government is already on course to borrow £235.7bn for the 20/21 financal year, assuming no more gilts are issued for the remaining nine months. The DMO will issue an update on its debt sales plan on June 29. Yields on government debt rose slightly on the not unexpected news.

European equities closed higher with the FTSE 100 +0.97%, the DAX 30 +0.95% and the CAC 40 +0.89%.

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