MARKET COMMENT: Property Stocks Outperform As UK Indices Retreat

Tue, 25th Feb 2014 10:45

LONDON (Alliance News) - The UK's main stock indices are trading lower Tuesday, with the mining and metal sectors leading the falls after Chinese stocks underperformed in Asia overnight.

The Shanghai Composite closed more than 2% lower on the back of ongoing concern over a slowdown in Chinese economic growth, given new fuel on Monday by a reported reduction in Chinese bank lending to the property market.

By mid-morning Tuesday the FTSE 100 is down 0.6% at 6,822.35, the FTSE 250 is down 0.4% at 16,468.40, and the AIM All-Share is down 0.2% at 890.57.

The FTSE 350 Industrial Metals sector is down 3.5% while the Mining sector is down 2.3%. Rio Tinto, down 3.3%, is leading the FTSE 100 lower. Also in the blue-chip index, Anglo American is down 2.7%, and Fresnillo is down 2.0%. In the FTSE 250, Evraz is a big faller, down 3.8%.

"As with any Chinese story the miners lead declines," said CMC Markets senior sales trader Toby Morris.

While Chinese authorities are trying to temper their property market, the UK property market continues to boom, with 50,000 new mortgages approved in January, up from 57,100 in December, according to the latest figures from the British Bankers Association. The reading exceeded economists expectations of 47,900 approvals.

"The buoyant UK housing market shows no sign of abating, but another larger than expected rise in mortgage approvals will fuel the fire for those who feel a housing bubble is around the corner," said UFX Markets managing director Dennis de Jong.

For now, however, the mortgage data has only added to the positivity around property companies. The Construction & Materials sector is biggest gainer Tuesday, being led higher by CRH PLC, which is up 4.0% after the group released results in line with expectations, while also announcing that it has identified 45 businesses, or 10% of net assets, for disposal as part of its ongoing portfolio review.

Capital & Counties is leading the Real Estate Investment Sector higher. The group's shares are up 3.4% after reporting an increase in full-year profit, as it continued its strategy to grow the value of its Covent Garden and Earls Court estates.

The housebuilding sector is also managing to stay out of the red, despite Persimmon shares trading down 0.4% after the FTSE 100 house builder reported full-year results. Analysts at Shore Capital said that although the results were solid, they see better value elsewhere in the sector, particularly highlighting Taylor Wimpey.

The biggest individual movers in either direction in the FTSE 250 are financial stocks, however. St. James's Place is up 4.4% while Ashmore Group is down 7.0%, after both companies reported results.

Italian retail sales fell by 2.6% year-on-year in December, after having risen by 0.2% year-on-year in November. Similarly, Italian consumer confidence also slipped in February, with the monthly survey recording 97.5, down from 98.0 in January, missing expectations of an increase to 98.5.

The euro has slipped from the session highs but remains relatively well supported against the dollar, continuing to trade in the middle of its recent tight range, at USD1.3750. The pound has risen slightly against the dollar following the UK mortgage data, but also remains fairly quiet, currently trading at USD1.6690.

Still to come Tuesday, the CBI distributive trades survey at 1100 GMT. Economists expect the survey of short-term retail trends to have ticked up slightly to 15 in February, from 14 in January.

The European Commission is also due to release its latest economic growth forecasts at 1245 GMT.

By Jon Darby; jondarby@alliancenews.com; @jondarby100