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Europe: Britain's FTSE steadies as housebuilders offset weaker commodities
[LONDON] Britain's top share index steadied on Wednesday, underperforming European peers, as a drop in energy stock prices prompted by oil price weakness offset a rally led by housing stocks.
The blue-chip FTSE 100 index closed flat in percentage terms at 7,188.82 points, after ending marginally higher in the previous session. In contrast, the pan-European STOXX 600 index was up 0.3 per cent higher in a choppy session.
Britain's mid cap index, however, ended at a fresh record closing level, up 0.3 per cent. Housebuilder Redrow was among the biggest gainers on the FTSE 250, up 4 per cent after posting a rise in first half profit.
"We have had a BUY recommendation on (Redrow) for a while and we stick with that both for absolute potential gain and also as part of our wider view that the midcap house builders offer much better value than the larger caps," Robin Hardy, analyst at Shore Capital Markets, said in a note.
Blue chip peers Persimmon, Taylor Wimpey and Barratt Developments were also among the biggest risers on the FTSE 100, all up between 2.3 per cent to 3 per cent.
However, commodity-linked stocks fell. After rallying earlier in the session, Rio Tinto ended 1.7 per cent lower, though the world's No. 2 iron ore miner beat profit forecasts on the back of cost-cutting and a strong recovery in iron ore prices and said it would pay a bigger-than-expected annual dividend.
"Mining companies are price-takers and have no control over commodity markets, but Rio has made ground by cutting cash costs and scaling back the dividend," Hargreaves Lansdown analyst Laith Khalaf said.
Rio shares have more than doubled since early 2016, and analysts cited some profit-taking on Wednesday after Rio's shares touched their highest level in four years earlier in the month.
The UK mining index fell 1.6 per cent, with BHP Billiton and Glencore dropping 3.4 per cent and 1.8 per cent respectively.
Gains were also negated by weaker energy stocks. The UK oil and gas index fell 1.3 per cent after oil prices extended Tuesday's falls earlier in the session following a massive increase in US fuel inventories and a slump in Chinese demand.
"Energy shares have been weighed on by a surprisingly large US API oil inventory build, stoking fears that rising US shale production will outweigh Opec cuts deigned to rebalance the global oil market," Accendo Markets analyst Henry Croft said.
Shares in Royal Dutch Shell and BP fell 1.5 per cent and 0.3 per cent respectively, while mid-cap Tullow Oil was down 5.4 per cent.