By Simon Jessop and Francesco Canepa
LONDON (Reuters) – Britain’s top share index looked set to snap its longest losing streak in 2-1/2 years on Monday after the building sector surged on a government plan to pump more cash into a scheme to boost construction.
The threat of sanctions between Russia and the West over Crimea that has contributed to a 4.5 percent slide from the 2014 high for the FTSE 100 kept a dampener on the broader market, after Crimea voted to quit Ukraine.
Persimmon led FTSE 100 gainers, rising 4 percent after British finance minister George Osborne said on Sunday he would extend a scheme to encourage housebuilding and develop a new town close to London.
Among other housebuilders, Barratt Developments, Taylor Wimpey, Berkeley Group and Crest Nicholson gained between 3 percent and 5 percent.
“It is mainly being used outside London by first-time buyers, so I think it’s going to be positive for names like Taylor Wimpey, Persimmon and Barratt,” Ian Osburn, an analyst at Cantor Fitzgerald, said.
“But, also, inside London the international buyer, (who) is pushing along the transactions and prices, now has confidence in government support, so I think it’s going to be positive for Berkeley too,” he said, noting that the scheme could boost those companies’ earnings by between 10 percent and 15 percent a year.
The promise of better profits in the sector, which was one of the best-performing year-to-date, helped the FTSE 100 add 0.4 percent to 6,553.58 points, bouncing from Friday’s one-month low and recouping a fraction of the 2.8 percent it shed last week.
The UK blue-chip index had fallen for six straight sessions, its longest losing streak since November 2011, leaving it “oversold” on its seven-day Relative Strength Index, a technical momentum indicator.
Qualified relief at the lack of any major violence underpinned the FTSE’s bounce, said Markus Huber, senior trader at Peregrine & Black, although near-term gains would depend on the scale of anticipated sanctions.
In a sign of that relief, the cost of insuring against future swings on the FTSE, as measured by the FTSE 100 Volatility index, fell about 5 percent but remains nearly 60 percent higher than at the start of the year.
(Editing by Louise Ireland)
- Market Movers
- FTSE 100
- Barratt Developments
- Taylor Wimpey