Week ahead: Rate cut may offer optimism for housebuilding sector
Persimmon is expected to signal early signs of optimism for the embattled housebuilding sector next week, after a Bank of England rate cut and the announcement of new Government planning policies.
And in a rather quiet week ahead, London markets are also expecting updates from financial services firm Legal & General (L&G) and real estate investment trust (REIT) Derwent London.
Following the Bank of England’s decision to cut interest rates last week, investors are up to get their first look at how business models and share prices react.
“After this week’s triple-header from the Bank of Japan, the US Federal Reserve and the Bank of England, interest rates will still be centre stage in the coming week, although this time it will be from a bottom-up perspective,” AJ Bell analysts said.
Legal & General, one of the largest workplace pension providers in the UK, is expected to announce its first-half results on Wednesday, 7 August, with analysts anticipating a potential boost of returns and interest in its funds and savings products.
L&G revealed its plans for a sweeping overhaul in June, including the merger of its two asset management arms and a first share buyback in over a decade as its new chief, Antonio Simoes, set out a fresh direction for the firm.
Investors will look for signs of progress in its target, which is expected to grow earnings by 6 to 9 per cent by 2027, as well as any signs of growth in its dividend.
Persimmon is also expected to announce its first-half results a day later on Thursday, 8 August, during a period in which its shares currently trade at a 12-month high.
This could be due to a variety of reasons, analysts suggest, whether that be interest rate cuts ramping up demand for mortgage rates or as a result of the new Labour government’s plans to ramp up house building.
Derwent London is also set to reveal its first-half results on Thursday, another company that analysts say could be sensitive to borrowing costs.
“Lower rates could help here, at least over time, even if the FTSE 250 index member’s loan-to-value ratio is fairly low by industry standards at 28 per cent,” AJ Bell analysts said.