Market Report: Housing market concerns hit Persimmon

Persimmon led the housebuilders lower last night, trading down amid concern that the "green shoots" of recovery may fizzle out as the spring selling season draws to a close.

Traders focused on a new circular from Panmure Gordon, which highlighted the fact that while builders' share prices have rallied during the first quarter and in April, prices and margins across the sector continued to slide. The improvement in sales, which Panmure partly attributes to pent-up up demand following 18 months of declines, may also give way as summer approaches.

"For the past 15 years, sales have been slower during the second half of the year than the first half. From a share price point of view, this has been reflected in the fact that housebuilders' share prices have outperformed the wider market during [the first quarter] in 22 of the past 24 years (and have generally gone on to underperform in [the second and third quarters])," the broker said, switching its stance on the sector to "negative" from "neutral".

The analysis sent investors scurrying for cover, with Persimmon, which was downgraded to "hold" from "buy" at Panmure, retreating to 366.25p, down 6.3 per cent or 24.75p, and Taylor Wimpey easing by 5.2 per cent or 2.25p to 41p.

Barratt Developments, which was cut to "sell" from "hold", was 8.4 per cent or 12.7p weaker at 138.75p, while Bellway, which was also cut to "sell", fell to 726.5p, down 3.8 per cent or 28.5p.

Overall, the threat of a global swine flu pandemic continued to dominate sentiment on the FTSE 100, which touched a low of 4,058.73 as the concerns mounted. Traders, who focused on the immediately vulnerable travel and tourism-related stocks in the session before, began to look at the potential impact on the wider market, as analysts weighed in with their thoughts on the likely economic implications if the current outbreak develops into a wider phenomenon. Credit Suisse highlighted an October 2008 World Bank report which suggested a "mild" pandemic, such as the Hong Kong flu of 1968-69, could dent global GDP by 2 per cent. A more severe pandemic, such as the Spanish outbreak of 1918-20, may wipe 4 per cent off global GDP, compounding the impact of the ensuing slowdown.

The fears mitigated a better than forecast reading on a widely followed gauge of US consumer confidence, which rose to its highest level since November. The news helped the FTSE 100 recover to 4,096.4, down 70.61 points. The FTSE 250, which touched a session low of 7,076.26, was also stronger after the data was released, recovering to 7,155.18, down 124.75 points, at the close.

Travel stocks were again held back by the swine flu fears, with British Airways easing to 143.1p, down 5.4 per cent or 8.1p, and Thomas Cook, which announced the cancellation of upcoming holidays involving travel from Britain to the Mexican coastal resort of Cancun, relaxing to 265.75p, down 1.7 per cent or 4.5p.

In the banking sector, reports that regulators may push lenders to hold more capital sparked fears of another round of dilutive fund raisings, sending Royal Bank of Scotland to 32.7p, down 4.7 per cent or 1.6p, and Lloyds Banking Group to 95.6p, down 4.9p.

Barclays, which eased slightly to 232.25p, down less than 1 per cent or 2p, was supported by a new "buy" note from Nomura, whose analyst said their previous "reduce" recommendation was wrong given the likely benefits of strong wholesale banking revenues.

Also on the downside, Randgold Resources, down 4.4 per cent or 149p at 3,250p, tracked the price of gold, which retreated as commodities traders sold on the back of rumours that a major investor was liquidating part of its gold reserves.

The wider mining sector was also weak amid concern about the outlook for metals prices, which weighed on the likes of Rio Tinto, down 6.3 per cent or 168p at 2,518p, and Xstrata, which was 6.1 per cent or 36.5p lighter at 563.5p.

On the second tier, St James's Place fell back to 157p, down 4.3 per cent or 7p, after the wealth management group failed to reassure investors about the impact of the Budget, which targeted top earners with changes to the pension tax relief system for those making more than £150,000 per annum.

Numis, which maintains an "add" rating on the stock, said: "We continue to assume that [the company] will be modestly net negatively impacted by these changes, all else equal, with the impact likely to start manifesting in lower new pension sales from [the second quarter of 2011], until we have sufficient reason to believe otherwise."

Among smaller companies, JJB Sports fell to 23.75p, down 5 per cent or 1.25p, as it emerged that Crystal Amber, an AIM-listed activist fund, had acquired a 13 per cent stake in the company.

According to a stock exchange announcement, the Guernsey-registered fund, which, according to its website, focuses on building stakes in undervalued companies and "taking action to enhance value", built the position on Monday. At the close, Crystal Amber was 0.5p stronger at 98p.