The FTSE 100 has fallen into the red, weighed down by house builders after Taylor Wimpey (TW) warned on margins, while shares in Sainsbury's (SBRY) slumped as the Competition and Markets Authority blocked the supermarket's merger with Asda.
The UK blue-chip index dipped 36 points, or 0.5%, to 7,436, led lower by Taylor Wimpey, down 4% at 185p after warning higher building costs were putting pressure on margins.
Shore Capital analyst Roddy Davidson, who downgraded the stock from 'buy' to 'sell' yesterday, estimated that Taylor Wimpey’s build costs accounted for 56% of the average selling price, meaning prices needed to rise like-for-like by 2.8% to hold margins steady.
‘Overall, this statement is weaker than the market will have been expecting with the double header of weaker pricing and higher costs,’ he said. ‘While the higher sales rate may deliver fractionally more unit sales than expected, any hit to margins would more than offset that.
Losses also spread to mid-cap builders. FTSE 250 fallers included:
- Bovis Homes (BVS) -3% at £11.09;
- Redrow (RDW) -4% at 604p;
- Bellway (BWY) -3% at £31.26;
- Crest Nicholson (CRST) -3% at 390p.
Sainsbury’s was another heavy blue-chip faller, down 5% to 215p after the competition regulator blocked the supermarket's planned merger with Walmart-owned Asda.
Barclays (BARC) shares fell 2% to 163p as the bank reported a 10% fall in first quarter profits.
Russ Mould, investment director at AJ Bell, said: ‘Barclays’ numbers will provide ammunition to activist investor Edward Bramson who wants the bank to shrink its investment banking division, after the unit reported an 11% drop in income.
‘The argument it should be sticking to simpler stuff is reinforced by a better showing from its high street banking and credit card operations.’
The FTSE 100 was also weighed down by stocks trading with entitlement to their latest dividend, or ex-dividend. Insurer Legal & General (LGEN) fell 15p, or 5%, to 275p, miner Antofagasta (ANTO) was down 26p, or 3%, at 932p and rival Glencore (GLEN) lost 8p, or 2%, to trade at 327p.
The FTSE 250 slipped 65 points, 0.3%, to 19,928 with Tullow Oil (TLW) edging down 1% to 238p, after problems at its Ghana field prompted the oil producer to lower output guidance for the year.
This came despite oil prices reaching 2019 highs, with Brent crude futures topping the $75 a barrel mark for the first time this year.
Among 'small-cap' stocks, Carpetright (CPR) surged 37% to 21p, after reporting a rise in quarterly like-for-like sales.