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FTSE 100 Index closes higher as housebuilder Persimmon sees profits soar by 29%

Published 23/08/2016

The FTSE 100 Index was 46.37 points higher at 6,875.18
The FTSE 100 Index was 46.37 points higher at 6,875.18

Housebuilders led the charge on the London market as Persimmon brushed aside Brexit uncertainty to book a hefty rise in profits.

The FTSE 100 Index closed 39.97 points higher at 6868.51 as Persimmon's pre-tax profits lifted 29% to £352.3 million for the first half of the year.

Shares soared 4%, or 76p, to 1870p as c hief executive Jeff Fairburn said that despite increased uncertainty, customer interest since the vote had been "robust".

Investors raced to buy up housing stocks following the update, with Barratt Developments among the biggest risers, rising close to 5%, or 22.7p, to 486.2p.

Berkeley Group and Taylor Wimpey were also on the up, climbing 99p to 2649p and 6.4p to 165.1p respectively.

Housing stocks have taken a pounding since Britain's vote to leave the European Union, with confidence in the UK construction sector falling sharply.

While housebuilders remain below their pre-Brexit levels, they have begun to claw back lost ground, boosted in part by the Bank of England's decision to cut interest rates from 0.5% to 0.25%, helping demand by keeping mortgages affordable.

Neil Wilson, analyst at ETX Capital, said Persimmon had matched Bovis Homes and Taylor Wimpey by delivering a strong set of half-year results in the face of Brexit concerns.

He added: "Coupled with robust retail sales figures out last week, upbeat reports from housebuilders suggest worries about Brexit may be subsiding.

"Of course, this might just be the calm before the storm. Earnings reflect only the first half of the year and although housebuilders are upbeat about the next six months, no-one knows for sure what the economic fallout really will be."

Across Europe, Germany's Dax was 0.9% higher and the Cac 40 in France closed up 0.7%.

The price of oil rose 1.4% to 49.85 US dollars a barrel amid speculation that Iran will back action by the OPEC cartel to tackle oversupply in the market.

On the currency markets, sterling rose above 1.32 US dollars, hitting a three-week high against the dollar, as speculators trimmed their bets against the UK currency.

The rise came as the latest CBI Industrial Trends Survey showed that export orders for Britain's manufacturers reached a two-year high thanks to the plunge in the value of the pound following the Brexit vote.

Export orders reached their highest level since August 2014, hitting minus 6 this month, up from minus 22 in July, the report said.

Total orders came in above expectations, dropping to minus 5 in August, down from minus 4 in July, but above economists' predictions of a fall of minus 10.

T he pound was up 0.3% against the dollar at 1.317 US dollars and 0.3% higher against the euro at 1.164 euro.

In UK stocks, supermarket giant Tesco rose 6.8p to 166.3p after emerging as the best performer out of the big four grocers in the latest Kantar Worldpanel figures.

Britain's biggest supermarket recorded a sales drop of 0.4% in the 12 weeks to August 14, followed by Sainsbury's, down 0.6%, and Morrisons, dropping 1.8%.

The sales update also helped Sainsbury's and Morrisons push higher, up 3.2p to 244.9p and 1.4p to 198.2p respectively.

The biggest risers on the FTSE 100 Index were Anglo American up 41.1p to 876.1p, Barratt Developments up 22.7p to 486.2p, BHP Billiton up 45.5p to 1078.5p, and Tesco up 6.8p to 166.3p.

The biggest fallers were Mediclinic International down 18p to 1068p, Shire down 55p to 5040p, British American Tobacco down 38.5p to 4850.5p, and United Utilities down 7.5p to 981p.

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