Housebuilders weigh on otherwise buoyant sentiment

The FTSE moved sideways for much of the morning, before slipping briefly into the red in the afternoon. A strong start on Wall Street helped the UK index move back onside ahead of the close. House builders proved to be the biggest drag on the index, whilst a marginally stronger pound also kept multinationals under pressure. However easing US – Sino trade tensions from apparent progress in trade talks kept sentiment buoyant and lifted US equities on the open.

Persimmon Dives On Help To Buy Exclusion Fears
Persimmon fell to the bottom of the FTSE, down some 6% on fears that it may be excluded from the Government’s help to buy scheme beyond 2021. Whilst investors are showing concern over the comments from James Brokenshire, Britain’s housing minister, we consider that it would be difficult to justify given that the house builder hasn’t broken any specific rules as such and that the concerns raised have supposedly been put well behind the firm. Furthermore, Persimmon is one of the biggest Help of Buy firms.

Today’s exaggerated sell off could have more to it. Persimmon results due tomorrow, the share price up is up over 15% across the past three months and Brexit uncertainty is growing as the 29th March deadline nears. These factors are giving investors plenty of reasons to book profit and sit on the side line. The negativity spread to other house builders such as Taylor Wimpey and Barratt Development, which dominated the lower reaches of the index.

Pound Traders Remain Optimistic
Sticking with Brexit, the pound was showing some resilience versus the weaker dollar, even as Theresa May insisted that there would be no extension to Article 50. Speaking from Sharm – El – Sheik where the PM has been using a summit to continue pursuing Brexit talks, Theresa May is sticking firmly with her belief that a deal is within grasp and that a delay would not achieve anything more than delaying decisions. 

Investors will now look towards Theresa May’s update in Parliament tomorrow. However, with the big date set as 12th March for the meaningful vote – there is still some time to go until last chance saloon. The pound remains comfortably above $1.30. At this level a no deal Brexit is not being priced in. This means that pound traders still expect the no deal Brexit option to come off the table before it is too late.