The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.
Almost all the UK housebuilders were able to post impressive figures for their last quarterly results, however the shares have predominantly fallen since then. The primary reason for this disappointing performance has been the increasing sentiment that the Bank of England will raise interest rates ahead of time.
Two weeks ago, BoE governor Mark Carney used his Mansion house speech as an opportunity to state that he was surprised the markets had not been fully factoring a rate rise in the near future. This triggered an aggressive move in Sterling as currency traders misread this as an indication that they would start in 2014. Some swift backtracking from Mark Carney early the next week saw calmer heads all round.
The end of last week once again saw Mr Carney make comments more directly focused on the housing market. As has been the case on a number of occasions, he indicated that he does not think interest rate changes should be used as the primary tool to cool the house price bubble that is forming. Restrictions on the multiples of income that mortgage appliers can use will help, but ultimately less red tape on new developments and the ensuing increase in properties being built will help rectify the situation.
Persimmon, like most housebuilders, has seen a swift bounce in its share price, but will need more in order to convincingly break out of this downward trend it has been in. Closing the gap to early June’s 1330p, which looks likely to coincide with the 50- and 100-day moving averages will be the first hurdle.