Market Report: Bovis Homes profits warning adds to housing bubble fears

Investors have speculated for months now that the housing bubble might be about to burst, and a profits warning from Bovis Homes only added fuel to the fire.

Shares in the FTSE 250 housebuilder fell by 85p, or 8.6 per cent, to 904p as it racked up its worst day on the stock market since 2008, when the property industry was last in freefall. Bovis blamed planning delays at new, high-profit sites and warned that its annual results would reflect the money made from less-profitable spots.

Barclays insisted that the profits warning was a one-off. Glynis Johnson, a Deutsche Bank analyst, agreed, saying: “Against a tide of positive results in the sector, the trading update feels like a cold shower.”

Nevertheless, investors ran for cover, causing shares in rival housebuilders to fall. Persimmon was down 25p at 1,840p and Berkeley Group ended 46p lower at 3,093p.

The FTSE 100 advanced by 50.96 points to 6,329.93 after the US Federal Reserve released its latest minutes, confirming that it still plans to raise interest rates next month.

Johnson Matthey rose by 237p, or 9.7 per cent, to 2,694p after it unveiled plans to line investors’ pockets with a £305m special dividend following the sales of its precious metals refining and research chemicals businesses.

The world’s largest maker of auto-catalysts also speculated that stricter testing for diesel cars in the wake of the Volkswagen emissions scandal would play into its hands.

Sky’s stock rose by 11p to 1,103p after Ofcom ruled that it no longer has to offer Sky Sports 1 and 2 to rivals BT and TalkTalk, BT shares were up 3.85p at 491.1p but TalkTalk fell by 6.7p to 235.4p.

Investors dug into caterer Compass Group, sending its shares up 19p to 1,075p, after its French rival Sodexo’s strong results and €300m shares buyback.

The challenger banks Aldermore, 14.7p lower at 266.4p, and Shawbrook, down 3.9p to 335p, fell after downgrades from Bank of America-Merrill Lynch.

On the Aim listings, shares in the Chilean gold miner Orosur Mining rose by 1.13p, or 20 per cent, to 6.75p as management convinced investors to buy in during a visit to London.