FTSE report: Property shares feel the chill after house price news

LONDON FTSE 100 CLOSE 5,990.2 -24.6

A LACKLUSTRE session in London pushed the benchmark FTSE 100 Index back below the 6,000 level, with HBOS's latest downbeat assessment of the property market weighing on housebuilding shares.

The bank said the average cost of a home in the UK dropped by 2.5 per cent in March, the biggest monthly fall since September 1992 and the second-largest drop ever.

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Despite hopes of a cut in interest rates at this week's meeting of the Bank of England's monetary policy committee, housebuilding giant Persimmon felt the pressure most in the property sector with a decline of 3 per cent, or 19p, to 687p.

DIY firms – whose fortunes are closely linked to those of the property sector – also fared badly, with B&Q owner Kingfisher off 3.3p at 130.4p and Homebase owner Home Retail Group slipping 7.75p to 265p, a drop of 3 per cent.

Investor nerves were also tested by a stark warning from the International Monetary Fund that worldwide losses from the credit crisis could top almost $1 trillion (508 billion).

The Bank of England said it would pump an extra 5bn into crisis-struck money markets in an attempt to ease liquidity, which helped bring three-month London interbank lending rates down further from the recent highs above 6 per cent.

Angus Campbell, head of sales at Capital Spreads, said: "As people await for the earnings season to start in earnest and this (Bank of England] decision on Thursday, (there is] slight sitting on hands just waiting. Is this the quiet before the storm?"

HBOS, the UK's biggest mortgage lender, fell 10.5p to 549.5p, while in the retail sector Next slipped 37p to 1,195p and Marks & Spencer tumbled 12.25p, or 3 per cent, to 379.5p. Royal Bank of Scotland escaped relatively unscathed, dipping just 1.75p to 374.25p.

One of the biggest gains of the session came from BT after the telecoms group announced the earlier-than-expected departure of chief executive Ben Verwaayen, ending a six-year tenure. But analysts welcomed the succession plan, with shares up 3.5p to 233.25p after BT said Ian Livingston, currently head of retail, would take the helm in June.

Elsewhere, a fine of 35.8 million for Severn Trent failed to derail its share price, even though payment for the Ofwat punishment for deliberately providing false information and poor customer service will come from shareholder funds.

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Analysts expressed relief that matters relating to previous poor performance were now largely out the way, clearing the path for a possible takeover. Shares gained 1p to 1,445p.

On the downside, drugs giant AstraZeneca lost 3.1 per cent to 2,021p after Goldman Sachs downgraded its rating on the group to "neutral" from "buy". GlaxoSmithKline also fell 3.1 per cent, to 1,105p, after it failed to report some post-marketing data on its diabetes drug Avandia, the US Food and Drug Administration said in a warning to the group.

DOW JONES 12,577.00 -35.42

WALL Street fell back in afternoon trading in New York after a key housing index fell to a record low and gloomy outlooks by semiconductor companies AMD and Novellus Systems weighed on the technology sector.

A report by the National Association of Realtors showed that pending sales of previously owned homes in February fell to the lowest on records dating back to 2001. The Dow Jones home construction index fell 3.6 per cent as shares of housebuilders slid.

AMD, the second-largest maker of computer processors, gave a first-quarter revenue estimate below expectations after Monday's close and said it would cut 10 per cent of its workforce. Its shares were off 3 per cent yesterday.

Shares in Novellus, a semiconductor equipment maker, fell 7 per cent after it said first-quarter earnings would be lower than expected and revenue would be at the low end of its forecast range.