Housebuilders battered as interest rates rocket
HOUSEBUILDERS took a battering as fresh fears over rising interest rates cast a bleak outlook over the sector.
The respite brought by the Bank of England’s dramatic intervention in gilt markets on Wednesday came to an abrupt end as attention turned to the outlook for the housing market.
Barratt Developments led the slump, down 6.3pc, or 21.6p, to 323.74p, followed by Taylor Wimpey which fell 6.5pc, or 5.88p, to 85.08p while Persimmon dropped 5.7pc, or 75p, to 1175p.
Meanwhile Rightmove, the estate agent portal, plunged 7.1pc, or 35.7p, to 466.6p.
The sell-off was all the more brutal at Barratt and Rightmove as their shares traded ex-dividend, meaning only those who bought the stock before this point can receive the upcoming dividend.
The prospect of further hefty interest rate hikes has fuelled fears of a downturn in the housing market as mortgage costs rise.
This could hit demand for new homes and result in lower prices, hurting the profits of developers. ‘The risk is still looming that if mortgage rates become increasingly unaffordable, then there could be a severe correction in the housing market, causing a fresh maelstrom of problems for struggling homeowners and a worsening outlook for housebuilders,’ said Hargreaves Lansdown analyst Susannah Streeter.
Anxiety returned to the markets as the FTSE 100 sank 1.77pc, or 123.80 points, to 6881.59 and the FTSE 250 fell 3.06pc, or 530.57 points, to 16,790.40.
The losses were echoed on stock markets around the world with Germany’s Dax index down 1.71pc and the Cac in France by 1.53pc while on Wall Street, the Dow Jones fell 1.54pc.
Back in London, Synthomer suffered its worst day on the stock market. The polymer maker, which sells the raw materials used to make medical gloves, said its profit for the year is expected to be 10-15pc below previous expectations amid a global slowdown in orders as companies use supplies stockpiled during the pandemic.
There are also concerns over its balance sheet and whether a rights issue will be needed to raise more funds. It fell 34.8pc, or 47.95p, to 90.05p.
Capricorn Energy has ditched a merger with fellow FTSE 250 firm Tullow Oil in favour of forming a new group with Israel’s NewMed. Capricorn shareholders, who will pocket a special dividend of £1.72 per share, will own 10.3pc of the company with the rest under the control of NewMed investors.
The news will come as a blow to Tullow Oil, which only two weeks ago said that it remains ‘fully committed’ to the merger to ‘create a leading African energy company’.
Capricorn rose 2.5pc, or 6p, to 245.6p while Tullow fell 6.6pc, or 2.92p, to 41.52p.
IHG reassured the market that a cyber-attack on September 6 failed to access guests’ personal data. The owner of Holiday Inn and Crowne Plaza said its booking websites and mobile app were up and running again the next day. It sank 2.5pc, or 1.27p, to 48.99p.
Meanwhile Yamin ‘Mo’ Khan, the boss of the clinical trial specialist Open Orphan, has snapped up almost £50,000 of shares. It rose 14.3pc, or 1.25p, to 10p.
Avon Protection landed its first order, worth £38.6m from the US Army under its next-generation helmet contract. The headgear and gas mask maker said deliveries should begin next year. It climbed 6pc, or 61p, to 1081p.
Two Polymetal directors have stepped down. Riccardo Orcel leaves the London-listed Russian gold producer only months after joining as chairman while Giacomo Baizini’s exit comes after four years. It fell 2.5pc, or 5p, to 195p.