London open: FTSE gains after landslide Labour victory; housebuilders rally

5th Jul 2024 07:55

(Sharecast News) - London stocks rose in early trade on Friday, with housebuilders pacing the gains as Brits woke up to the first Labour government in 14 years.

At 0820 BST, the FTSE 100 was up 0.3% at 8,268.04, while the FTSE 250 was ahead 0.2% at 20,659.20. Sterling was 0.1% firmer against the dollar at 1.2767 and flat against the euro at 1.1803.

At 0754 BST, with eight seats left to declare, Labour had a confirmed 410 seats, up 211, while the Tories were on 119, down 246. The Liberal Democrats were on 71, a gain of 63 and the SNP held on to eight seats, a loss of 37, in a shocking night where it surrendered seats to a resurgent Labour north of the English border in a voter backlash over scandals within the SNP.

At the 2019 general election the Conservatives had a majority of 80, with 365 seats to Labour's 203, illustrating the startling decline of the Tories and how Starmer turned around his party's fortunes around.

Chris Beauchamp, chief market analyst at IG, said: "Labour will form the next government in the UK, but compared to 2019 it has been accompanied by little fanfare on financial markets.

"This moment has been on the cards since Liz Truss' short-lived premiership, and the lack of movement overnight in sterling is a testament to how much of a foregone conclusion this has been.

"There has been some buying of the pound among IG clients over the past 24 hours, but the lack of movement overnight in FX markets meant interest was limited as the news came in. The new PM has his work cut out for him, but for the moment financial markets are prepared to give him the benefit of the doubt."

On the macroeconomic front, the US non-farm payrolls report for June is due at 1330 BST, along with the unemployment rate and average earnings.

On home shores, data from Halifax showed that house prices remained largely unchanged in June, reflecting a subdued market.

Average house prices edged down just 0.2% on a monthly basis in June. On an annual basis, growth was unchanged on May, at 1.6%. As a result, a typical UK house now costs £288,931.

Amanda Bryden, head of mortgages at Halifax, said: "This continued stability in house prices - rising by just 0.4% so far this year - reflects a market that remains subdued, though overall activity has been recovering.

"For now, it's the shortage of available properties, rather than demand from buyers, that continues to underpin higher prices.

"Mortgage affordability is still the biggest challenge facing both homebuyers and those coming to the end of fixed-term deals."

In equity markets, housebuilders gained following Labour's landslide victory, with Vistry, Persimmon, Taylor Wimpey, Barratt and Crest Nicholson all up.

RBC Capital Markets said in a research note that the Labour Party has "big plans" for the sector.

"If election pledges turn into policy, today is more than just a new day in housebuilding, it is the dawning of a new age," it said.

"In the next 100 days we are likely to see the reinstatement of housing targets, the refining of greenbelt and the reform of planning, and by the end of the year the newest version of Labour may have announced a new generation of new towns.

"Over the last few years housebuilders' potential has been hamstrung, but over the next few this potential is likely to be unleashed. If the new Government's walk matches its talk we expect the sector to re-rate, and in the very short term we suspect that the talk alone will be enough to lift share prices. In our view, whilst all housebuilders benefit from the anticipated changes the biggest winners will be Taylor Wimpey, Persimmon and Vistry."

Elsewhere, Shell nudged higher as it said in a second-quarter update note that it would take a hit of up to $2bn after it paused construction work on a biofuels plant in Rotterdam and sold a refinery in Singapore.

It also said that integrated gas production would be within expectations of 940,000 to 980,000 barrels of oil equivalent per day.

In broker note action, Lloyds was boosted by a rating upgrade at BNPP Exane, while Close Brothers was higher after an initiation at 'buy' at Deutsche Bank.

Softcat was hit by a downgrade to 'underperform' at Jefferies.

Market Movers

FTSE 100 (UKX) 8,268.04 0.32%

FTSE 250 (MCX) 20,659.20 0.24%

techMARK (TASX) 4,774.61 0.32%

FTSE 100 - Risers

Vistry Group (VTY) 1,283.00p 1.91%

Persimmon (PSN) 1,459.00p 1.89%

Glencore (GLEN) 489.30p 1.77%

Taylor Wimpey (TW.) 151.00p 1.48%

Hikma Pharmaceuticals (HIK) 1,857.00p 1.42%

Lloyds Banking Group (LLOY) 58.08p 1.40%

Barratt Developments (BDEV) 498.80p 1.38%

Flutter Entertainment (DI) (FLTR) 15,580.00p 1.33%

Smurfit Kappa Group (CDI) (SKG) 3,574.00p 1.19%

Fresnillo (FRES) 582.50p 1.04%

FTSE 100 - Fallers

HSBC Holdings (HSBA) 683.90p -1.07%

Standard Chartered (STAN) 732.20p -0.95%

Aviva (AV.) 478.30p -0.56%

Imperial Brands (IMB) 2,050.00p -0.24%

National Grid (NG.) 920.40p -0.24%

Smith (DS) (SMDS) 424.00p -0.24%

Rio Tinto (RIO) 5,349.00p -0.19%

United Utilities Group (UU.) 989.40p -0.14%

Severn Trent (SVT) 2,427.00p -0.08%

Tesco (TSCO) 307.60p -0.03%

FTSE 250 - Risers

SDCL Energy Efficiency Income Trust (SEIT) 67.40p 3.22%

4Imprint Group (FOUR) 6,120.00p 3.20%

Energean (ENOG) 1,036.00p 2.68%

Close Brothers Group (CBG) 467.00p 2.50%

RS Group (RS1) 738.50p 2.43%

Crest Nicholson Holdings (CRST) 249.80p 2.13%

Bakkavor Group (BAKK) 150.00p 2.04%

Baltic Classifieds Group (BCG) 255.00p 2.00%

Grafton Group Ut (CDI) (GFTU) 957.30p 1.95%

Supermarket Income Reit (SUPR) 74.30p 1.78%

FTSE 250 - Fallers

Softcat (SCT) 1,722.00p -4.23%

Tyman (TYMN) 349.50p -3.19%

Me Group International (MEGP) 165.80p -3.15%

BlackRock World Mining Trust (BRWM) 570.00p -3.06%

Syncona Limited NPV (SYNC) 110.20p -2.65%

Bridgepoint Group (Reg S) (BPT) 237.00p -2.63%

Renewi (RWI) 670.00p -2.05%

Spectris (SXS) 2,848.00p -1.79%

Ninety One (N91) 171.50p -1.55%

Clarkson (CKN) 4,215.00p -1.52%