FTSE falls as housebuilders suffer

Weakness in the housebuilders helps accentuate FTSE losses driven by a weaker pound and risk aversion.

• FTSE tumbles, as risk aversion continues
• US growth expected to slow
• UK housing market under further pressure according to RICS

FTSE losses ramped up into the close, as housebuilders led the index to the lowest point in over a week. A strong batch of industrial and manufacturing production figures helped push GBPUSD higher this morning, driving the FTSE lower. It has been yet another day of risk-aversion for financial markets, with little appetite to buy the dip evident yet. It is common to see low volumes during summer months, and this can result in oversized sell-offs as we’ve seen this week. To an extent this seems like an overreaction, and it is likely that this sell-off will prove short-lived.

The latest UK growth forecasts from NIESR point towards a gradual slowdown in momentum, with the three months to July expected to fall to 0.2%, from 0.3% in the second quarter. This is the latest in a line of economic indicators that suggest the UK is finally exhibiting the kind of economic slowdown that spurred the Bank of England to cut rates in the wake of the Brexit vote last year.

The housing market decline evident within London over recent months appears to be spreading across the country, with the latest report from RICS highlighting a slowdown in sales. Yesterday’s report from the London School of Economics and VATT suggested the recent stamp duty changes are having a significant negative effect on housing transactions, and today we are seeing that borne out in the RICS data. The continued slowdown we are seeing in house price growth and housing sales is proving a drag on the housebuilder sector, with Barratt Developments and Taylor Wimpey suffering heavily today.