Rio rides to FTSE's rescue as Carney blows housebuilders down

Thu Nov 28, 2013 12:10pm EST

* FTSE 100 up 5 points at 6,654.47

* Rio rallies on new growth plans

* Housebuilder haunted by Carney's FLS pull-back

* Kingfisher falls as Europe weighs on performance

By David Brett

LONDON, Nov 28 (Reuters) - Heavyweight miner Rio Tinto helped keep the FTSE 100 in positive territory on Thursday, offsetting weakness in housebuilders after the Bank of England removed a mortgage support scheme.

Rio Tinto enjoyed hefty gains in an otherwise subdued session - adding 6 points on its own to the FTSE 100 - as investors responded bullishly to the company's new growth plans.

The announcement provided a much needed lift to a sector, which remains down 19 percent in 2013 and dogged by ongoing concerns over the outlook for growth given the slowdown in China, the world's most voracious consumer of raw materials.

Britain's top share index closed up 5 points, or 0.1 percent, at 6,654.47, following a fresh record high on Wall Street overnight. World stock markets remain underpinned by central banks' commitment to equity-friendly monetary policy.

"Another strong close from U.S markets last night has provided the springboard for the FTSE to edge higher," said Toby Morris, Senior Sales Trader at CMC Markets.

London's blue chip index traded in a tight 27 point range, however, as Wall Street's shutdown on Thursday for Thanksgiving kept volumes low and the market without direction.

HOUSEBUILDERS

British housebuilders were among the most traded stocks.

Persimmon shed 6.1 percent in double its average daily volumes after Governor Mark Carney said the BoE would refocus its Funding for Lending scheme on loans to small firms to avoid fuelling house price inflation.

FTSE 250 peers Taylor Wimpey and Bovis Homes fell 6.2 percent and 4.8 percent respectively as investors fretted about the change in the scheme which had contributed to a rebound in the housing market and helped UK housebuilders rise around 70 percent in 2013.

"I would be selling on (housebuilder) rallies now as a short/medium-term top is now in place on these comments," said Basil Petrides, trader at Hartmann Capital.

Liberum Capital, however, while noting the nervousness of the equity market to the BoE announcement, was more sanguine over the outlook for housebuilders.

"The bond market appears to think that this will not affect banks' access to capital ... The Bank of England's actions towards FLS don't imply any sudden hostility towards Help to Buy," it said in note.

Kingfisher tumbled 4.3 percent after Europe's biggest home improvements retailer posted third-quarter profit at the lower end of forecasts and cautioned that markets remained tough, particularly in France.

"If you are anything to do with France, like Kingfisher, then you've got an issue," said Shore Capital strategist Gerard Lane. "I think the aggregate euro area will struggle, there is no evidence of economic recovery.

"It might have stopped going down at the rate it was going down before, but that doesn't mean it's going to start growing."

Plumbing supplies group Wolseley and the world's biggest catering company Compass Group also both warned of tough conditions in Europe. Their shares fell 1.7 and 1.8 percent, respectively.

Citigroup also cut its rating on Compass to "neutral" on valuation grounds.

Imperial Tobacco and British American Tobacco fell on media reports that the British government is set to announce a review of cigarette packaging in an effort to deter youngsters from smoking.

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