Miners rise; Thomas Cook shares tumble on FTSE 250
British blue-chip stocks closed with gains for a third day in a row Wednesday, as commodity shares strengthened, but home building stocks were knocked lower after the U.K. finance minister outlined the government's plans for the housing market.
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What markets are doing: The FTSE 100 index finished up 0.1% at 7,419.02, building on Tuesday's advance of 0.3% (http://www.marketwatch.com/story/ftse-100-edges-lower-as-brexit-hopes-buoy-pound-2017-11-21).
The midcap FTSE 250 index picked up 0.4% to close at 20,013.86.
The pound climbed to $1.3293, up from $1.3237 late Tuesday in New York. But it had dropped to an intraday low against the dollar after the government downgraded its British economic growth forecasts.
The 10-year gilt yield pared its gain to less than 1 basis point at 1.272%, according to Tradeweb.
See:How German political turmoil could hurt the pound more than the euro (http://www.marketwatch.com/story/heres-why-german-political-turmoil-could-hurt-sterling-more-than-the-euro-2017-11-21)
What's moving markets: Home building stocks showed the greatest reaction to the Autumn Budget presented by Chancellor of the Exchequer Philip Hammond. Shares in the companies were yanked down after Hammond said the government--which has been trying to boost the available amount of affordable homes--would launch an urgent review of so-called landbanking.
"The idea is that house builders over many years have been steadily buying up land at cheap prices. and they keep building at this steady, but low, pace and that helps them keep prices high. It sounds like a conspiracy but it's common sense, from their perspective," said Chris Beauchamp, chief market analyst at IG, in a telephone interview.
"The government is going to look into this now and that could go towards compulsory purchases at lower [land] prices--that would hit [home builders'] balance sheets," he said.
Meanwhile, the pound bounced back from an intraday low of $1.3214. Sterling had been dragged lower as Hammond said the Office for Budget Responsibility cut growth forecasts for the economy. GDP this year is now expected to expand by 1.5%, down from a previous forecast of 2%. The 2018 growth rate projection was cut to 1.4% from 1.6%.
"Dollar weakness is coming into play, clearly a trend reasserting itself there," and that's helped the pound, said Beauchamp. He said sterling's also been helped by expectations that Brexit talks may regain momentum. "That's probably taking precedence over this one budget, which was depressing in terms of growth forecast and productivity growth."
The Financial Times reported (https://www.ft.com/content/525c4bd8-cede-11e7-9dbb-291a884dd8c6) that the U.K. and the European Union are looking to agree on a "divorce bill"--the amount the U.K. will have to pay on withdrawing from the bloc--within three weeks.
But the budget wasn't completely gloomy, in part as duties on fuel and alcohol and additional funds for the NHS were included, said Beauchamp.
Housing shares: Home builder stocks struggled, with Barratt Developments PLC (BDEV.LN) down 3.7%, Berkeley Group Holdings PLC (BKG.LN) down 2.6%, Persimmon PLC (PSN.LN) off 1.9% and Taylor Wimpey PLC (TW.LN) lower by 1.8%.
On the midcap FTSE 250 , Bellway PLC (BWY.LN) lost 2.5% and Bovis Homes Group PLC (BVS.LN) gave up 2.1%.
Hammond did say that stamp duty will be abolished for first-time buyers of homes costing up to GBP300,000. For homes purchased at a price between GBP300,000 to GBP500,000, first-time buyers will now pay stamp duty on the last GBP200,000.
Miners on the up: Mining shares rose as dollar-denominated metals prices gained "amid [dollar] weakness (U.S. holiday, dovish Yellen, tax delays), Indonesian mine-supply disruptions and hopes that Chinese output cuts will be less than expected," said Accendo Markets analysts early Wednesday.
Among miners, Fresnillo PLC (FRES.LN) added 4.3%, Randgold Resources PLC (RRS.LN) moved up 1.4%, and BHP Billiton PLC (BLT.LN) (BHP.AU) (BHP.AU) tacked on 0.7%.
Stock movers: TUI AG slipped 0.5%, coming off session lows. The shares were hurt alongside an 8.4% slide in shares of rival Thomas Cook Group PLC (TCG.LN) on the FTSE 250.
Thomas Cook said in its full-year 2017 earnings report that gross margin was reduced in part because of a competitive market in Spain. The company's fiscal pretax profit rose to GBP46 million. (http://www.marketwatch.com/story/thomas-cook-fy-profit-rises-hikes-dividend-by-20-2017-11-22)
Shares in Royal Bank of Scotland Group PLC (RBS.LN) closed 1.4% lower after the U.K. budget documents indicated the government will start re-privatizing the bailed-out bank in 2019.
(END) Dow Jones Newswires
November 22, 2017 12:06 ET (17:06 GMT)