Market Report: Housebuilders plummet despite hopeful outlook

The housebuilders found themselves near the bottom of the second tier last night after a tough week for the sector, despite support from analysts and traders who said the stocks could prove a surprisingly strong investment opportunity.

Market specialists were making bullish noises about the housebuilders yesterday, despite a run of bad news including figures that showed mortgage approvals for September were at their lowest for 18 months and statistics that revealed a drop in house prices. Traders now believe the bad news is already priced into the stocks.

The brokerage firm Matrix released a note which said an upturn in activity could be seen next spring, and gave Redrow – the sector's worst performer of the day, down 3.8p to 110.5p – an "add" recommendation. Analyst Simon Brown gave the same label to Bellway, which lost 16p to 534p, and placed Persimmon as "buy" with a target price of 485p, as it dropped 7.8p to 341p.

Another supporter of the industry was Les Ames, head of dealing at WH Ireland, who said that the companies have learnt a lot. "I don't think it's going to be easy for them by any stretch of the imagination," he said, "but I'm not as desperate as some people are about the housebuilders."

Overall, trading on the FTSE 100 proved pretty tepid as the week drew to a close. It enjoyed a cautious start to the day as traders waited with baited breath for GDP figures from the Commerce Department in the US. When they did appear, the 2 per cent rise in the third quarter failed to give London a major boost, and it closed 2.73 points down on 5,675.16.

With the size of any potential stimulus measures from the US Federal Reserve dominating traders' thoughts recently, IG Index's David Jones said that the figures, combined with UK GDP data earlier in the week, "helped to sow doubts that markets have been taking it for granted that there would be more sizeable assistance to come from central banks".

Topping the blue-chip index last night was Scottish & Southern Energy, after it revealed that it was saddling 3.6 million of their customers with an increase in their gas prices of nearly 10 per cent. Up 38p to 1153p, it proved a boost for the utilities sector and was followed closely behind by fellow energy supplier Centrica, which rose 10.4p to 332.2p.

Shortly after posting results that showed an 18 per cent increase in net income earlier this week, Royal Dutch Shell enjoyed a positive session and finished on 2,026p, up 39p. There were further encouraging results in the sector, as across the channel Total announced that its profits had risen 54 per cent over the third quarter, and the Finnish company Neste Oil said its profits were up 36 per cent.

United Utilities saw its price rise 7.5p to 611p after the European Commission gave approval on Thursday for the French waste giant Veolia to buy a number of units from the British company, concluding that competition concerns were "unlikely".

At the bottom of the pile was British Airways as it announced expectation-beating figures for the first half of the year. Bank of America Merrill Lynch raised its price target to 350p from 295p, but investors decided to cash in on the airline's rises over the last few months, and it shed 10p to 270.7p.

Among the miners, Xstrata was particularly badly hit despite being the recipient of good news from Down Under. The state government in Queensland approved plans to expand one of its mines in a project which will cost A$274m (£168m); however, this wasn't enough to prevent it losing 40.5p to 1,209.5p. It would also have been paying close attention – together with rival Rio Tinto, which shed 69.5p to 4,036p – to noises from the Australian government that it may allow miners in the country to deduct carbon costs from a resources profits tax.

On the mid-tier, the biggest gain of the day was seen by Hunting, which announced that it was on the path to beating expectations for the year. Evolution Securities said that the results underpin their "positive 2011 outlook" for the company, which produces equipment for use on oil wells, raising its target price by 75p to 700p, and it gained 41.5p, to 644.5p.

Just behind it was Hikma Pharmaceuticals after it said that it had agreed a deal to buy Baxter International's injectables unit. The purchase, priced at $112m, is expected to bring in around $180m of revenue a year, according to Hikma's chief executive, Said Darwazah. The deal will double the size of its US business. Brokers approved, with Citi saying that it was "an attractive and financially sensible deal", and the market duly followed, as Hikma rose 49.5p to 786p.

Worries about the results of the midterm elections in the US, specifically in Nevada, hit the gambling sector as the chances of Harry Reid, a supporter of the industry, retaining his seat in his battle against Sharron Angle looked to have narrowed. As a result, the internet gambling company PartyGaming slumped near the bottom of the FTSE 250, losing 10.8p to 251.9p.

FTSE 100 Risers

BG Group 1,215.5p (up 25p, 2.1 per cent)

Rises after striking a deal with the Japanese company Chubu Electric Power on LNG.

GKN 177.3p (up 3.3p, 1.9 per cent)

Airplane parts company makes a gain as Goldman Sachs raises its target price to 285p from 220p.

National Grid 590p (up 6.5p, 1.11 per cent)

Company's LNG import terminal was expected to receive its first shipment yesterday.

FTSE 100 Fallers

Invensys 288.2p (down 4.9p, 288.2 per cent)

Drops after Singer Capital cuts price target by 50p, revising it down to 305p.

Aggreko 1,575p (down 17p, 1.07 per cent)

Another day of falls despite Credit Suisse increasing its target price to 1,660p to 1,640p.

GlaxoSmithKline 1,221p (down 12p, 0.97 per cent)

Announced licence of an Amicus Therapeutics' drug for the treatment of Fabry disease.

FTSE 250 Risers

Soco International 313.6p (up 13.6p, 4.53 per cent)

Bank of America Merrill Lynch upgrades advice on explorer from "neutral" to "buy".

Afren 129.5p (up 4p, 3.19 per cent)

Oil company makes a gain after its price target is increased 52p to 187p by Arbuthnot.

Carpetright 706.5p (up 20.5p,2.99 per cent)

Brushes off a "sell" recommendation from Seymour Pierce to enjoy its second day of rises.

FTSE 250 Fallers

Cookson Group 515p (down 22p, 4.1 per cent)

Bad end to the week for materials science company after fourth straight day of falls.

Computacenter 366p (down 11p, 2.92 per cent)

Investors indulge in profit-taking on back of strong recent run from UK IT firm.

Premier Foods 17.6p (down 0.4p, 2.22 per cent)

Another tough day for maker of Branston Pickle following warning on tough trading conditions.