By Atul Prakash
LONDON (Reuters) – Britain’s top share index edged lower on Friday, with bottler Coca-Cola HBC CCH.L slipping after disappointing results and UK homebuilders falling on concerns authorities may intervene to prevent a housing market bubble.
Coca-Cola HBC, the world’s No. 2 bottler of Coca-Cola KO.N drinks, fell more than 5 percent to become the worst performing stock on the blue-chip FTSE 100 index FTSE after reporting a bigger-than-expected quarterly loss, hurt by currency losses in its Russian and Ukrainian operations. (Full Story)
Home builders fell on growing expectations that the Bank of England may try to stop a housing bubble by tightening standards for mortgage lending. Speculation is rife that the central bank’s Financial Policy Committee will toughen lending rules when it meets on June 17.
Barratt Developments BDEV.L, the country’s biggest housebuilder by volume, fell 3.4 percent, while Persimmon PSN.L was down 1.4 percent.
“Investors are watching house prices, which have risen quickly. The Bank of England is clearly monitoring the situation and could take some action to stop the situation turning into a bubble,” Keith Bowman, analyst at Hargreaves Lansdown, said.
Britain’s housing market has made a swift recovery from the global financial crisis, with prices up about 10 percent in the past 12 months. (Full Story)
The fall in house builders, along with a drop in mining shares on growth concerns in countries such as China, dragged the FTSE 100 index down from this week’s 14-year high. The UK mining index .FTNMX1770 was down 2.2 percent, with investors switching to defensive stocks.
The FTSE 100 index was down 0.1 percent at 6,837.71 points by 1427 GMT, having dropped 0.6 percent in the previous session, taking its cue from Wall Street which sold off after results from Wal-Mart WMT.N disappointed and as small-cap shares extended their retreat.
The UK small cap index .FTSC was down 0.8 percent, while the mid-cap index .FTMC fell 1.7 percent, underperforming the wider market.
But losses were capped by a strong performance from individual firms. Retailers, often seen as defensive plays, were up. Wm Morrison MRW.L rose 2.7 percent, followed by Sainsbury SBRY.L, 2.6 percent firmer. Tesco TSCO.L was up 2.5 percent.
Morrison’s advance was helped by mounting speculation that a U.S.-led private equity consortium was weighing a bid for the company, traders said, with the Daily Mail’s market report noting talk of a possible 6.4 billion pound ($ 10.8 billion), or 275 pence a share, cash offer. Morrison declined to comment.
The sector built on gains seen in the previous session when there was a strong bias towards defensive stocks, which often lag when markets rise, supporting a view that the good times will not roll for long.
Frothy valuations are stopping investors from putting more money to work in equities. The FTSE 100 is trading on a 12-month forward price/earnings ratio of 13.7 times, against its 10-year average of 11.7 times, Thomson Reuters Datastream shows.
“The recent defensive rotation in equity markets underscores our view that the wider risk-on rally now looks tired,” Graham Bishop, senior equity strategist at Exane BNP Paribas, said.
(Additional reporting by Tricia Wright; Editing by Toby Chopra and Jane Merriman)
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