Home builders slide on report of government 'Help to Buy' review
U.K. stocks were pushed to a two-week high on Friday, with Royal Bank of Scotland Group PLC shares jumping after a well-received earnings report, while the pound pulled back against the dollar after a stronger-than-expected U.S. jobs report for July.
The FTSE 100 index rose 0.5% to 7,511.26, hitting its highest intraday level since July 21, FactSet data showed. The blue-chips gauge was on course to close above 7,500 for the first time since June 19.
RBS back in black: Shares of Royal Bank of Scotland Group PLC (RBS.LN) (RBS.LN) climbed 2.7% after the lender posted its first half-year profit in three years (http://www.marketwatch.com/story/rbs-swings-to-profit-as-one-off-effect-fades-2017-08-04), despite a $5.5 billion U.S. settlement fine. The bank earned GBP939 million ($1.23 billion) in the first six months of the year, compared with a loss of GBP2.05 billion in the year-ago period.
"A looming fine for mis-selling mortgage backed securities in the U.S. casts a long shadow, but the omens are looking a lot more promising for a return to private ownership," said Neil Wilson, senior market analyst at ETX Capital, in a note.
"Based on these figures, the return to genuine sustained profitability in 2018 appears a lot more realistic," he said.
RBS was bailed out by the U.K. government during the financial crisis in 2008, and it is still majority owned by the state. In the year-ago period, it paid the U.K. government more than GBP1 billion for the right to pay dividends.
Pound a leg down: U.K. stocks were driven to intraday highs as the pound was shoved to as low as $1.3033 against the dollar . The greenback leapt against major rivals after data showed the U.S. economy added 209,000 jobs in July (http://www.marketwatch.com/story/us-gains-209000-jobs-in-july-unemployment-retouches-16-year-low-of-43-2017-08-04), while wage growth was at a subdued, but expected, rate of 0.3%.
"Sustained labor market strength will likely mean that the Federal Reserve remains on track to raise interest rates for a third time this year and announce a plan to start its balance sheet reduction plan, despite a recent ebb in inflation pressures," said Kully Samra, U.K. managing director at Charles Schwab, in a note.
While the Fed may be poised to raise rates this year, the Bank of England on Thursday warned of slower British economic growth and wage pressures, partly due to a pending Brexit. Sterling late Thursday traded $1.3138.
The U.K.'s blue-chip index benefits from a weaker pound, as about 75% of all sales for companies on the benchmark are made overseas. For the week, the London benchmark was on track for a 1.4% gain.
Construction in focus: Home builders were among major decliners after Property Week said the government has initiated a review of the Help to Buy housing scheme (http://www.propertyweek.com/news/help-to-buy-could-end-early-under-government-review/5090767.article). The real-estate publication said the program, which provides financial aid to first-time home buyers, could be wound down or replaced before its planned end in April 2021.
"This could lead to the scheme being cancelled, or no change at all, but at the very least it does signal that the government's whole hearted support for the scheme has eroded," analysts at Liberum said in a note.
Shares of Barratt Developments PLC (BDEV.LN) dropped 4.5%, Persimmon PLC (PSN.LN) lost 4.2%, and Taylor Wimpey PLC (TW.LN) gave up 3.7%.
"The scheme is important to the industry as 38% of private completions make use of the scheme. Removal of the scheme would impact margins and sales rates," the analysts said.
Stock movers: Merlin Entertainments PLC (MERL.LN) added 5.7%. The theme park and resort operator said half-year revenue climbed (http://www.marketwatch.com/story/merlin-profit-flat-as-revenue-visitors-rise-2017-08-04) and that its 2017 profit outlook was in line with expectations.
Shares of Pearson PLC (PSON.LN) turned lower, falling 1.1%. Shares had risen earlier after the educational publisher said its pretax loss narrowed (http://www.marketwatch.com/story/pearson-to-cut-3000-jobs-as-loss-narrows-2017-08-04) in the first half of the year and that it plans to cut around 3,000 jobs.
On a downbeat note, Hargreaves Lansdown PLC (HL.LN) fell 2.7% after saying it won't pay a special dividend this year (http://www.marketwatch.com/story/hargreaves-lansdown-wont-pay-special-dividend-2017-08-04). The financial services firm said it won't have sufficient regulatory capital surplus if it pays out the extra dividend.
(END) Dow Jones Newswires
August 04, 2017 10:49 ET (14:49 GMT)