Interactive Investor

Bricks and mortar build FTSE 100 rally

23rd August 2016 14:47

Harriet Mann from interactive investor

London's FTSE 100 this month made a potentially significant technical move on the charts that could make 7,000 very possible. Led by the housebuilders and miners, there was plenty to cheer Tuesday as the premier pack recovered a chunk of recent lost ground.

Falling as much as 9% after the European referendum, London's blue-chip index has since rallied by 20%, breaking above chart resistance this month as investors look to non-domestic earnings and themes.

A surprisingly good first half from Persimmon handed another round of ammunition to the housebuilder bulls as the sector moved closer to filling the dramatic post-Brexit gap-down. Persimmon is up 3.6% at 1,857p after boss Jeff Fairburn said visitors to sites was up 20% year on year and the private sale reservation rate was up 17%.

Overtaking Persimmon to take the top spot is Barratt Developments, however, which jumped 3.7% to 481p. Berkeley Group rose 3% and Taylor Wimpey 3.1%. Clearly, investors remain happy to take on the risk associated with this highly cyclical but lowly-rated sector, which currently offers prospective dividend yields of at least 6%.

Miners, the standout performers in 2016 so far, also went some way to making up for a two-day losing run. Anglo American, up 3.8% growth at 863p led the way, followed by BHP Billiton following a broker upgrade on better-than-expected potential for free cash flow. Rio Tinto, Glencore and Antofagasta chipped in, too.

Supermarket Tesco was also basking in the sun, up at a five-week high as the recent good weather and Olympics helped slow falling sales. Latest data from Kantar Worldpanel showed sales down just 0.4% in the 12 weeks to 12 August, its slowest rate of decline for six months. A 17-month trend of falling sales could be about to reverse.

Losses were subdued on the other side of the blue-chip coin, with Mediclinic International the worst performer, down 1.4% at 1,071p. London Stock Exchange, caterer Compass and high-flying Irish builder CRH also feature among the dozen laggards.

With the oil price losing ground, growth is more subdued among the explorers and producers, too, with BP up a fraction and Royal Dutch Shell tipped into the red.

Among the mid-caps, JRP Group is rocketing. The group, merged from the Just Retirement and Partnership businesses, has had a rotten run, but is up 17% Tuesday following a positive trading statement ahead of interim results on 15 September.

"Trading at c52% of our 2016F IFRS [net asset value] of c170p and at 44% of the end June 2016 embedded value, the stock is materially undervalued," reckons Eamonn Flanagan at Shore Capital.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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