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FTSE edges higher, housebuilders extend relief rally
June 27, 2014 / 12:01 PM / in 3 years

FTSE edges higher, housebuilders extend relief rally

* FTSE 100 index rises 0.1 percent

* Housebuilders boosted by bullish HSBC note

* Rolls-Royce up; Airbus set to revamp A330 with the firm

* Blue-chip index heads for weekly decline

By Tricia Wright

LONDON, June 27 (Reuters) - Britain’s top shares rose on Friday, led by housebuilders after the Bank of England’s curbs on house prices proved less draconian than had been feared.

Barratt Developments jumped 4.1 percent, the top FTSE 100 riser, followed by Persimmon, up 1.9 percent, whilst Redrow, Taylor Wimpey and Bellway were among the best mid-cap risers, up 2.5-6.7 percent.

The gains, which built on a steep advance in the previous session fuelled by the Bank of England announcement, came as HSBC flagged up a “golden” entry opportunity into the sector.

The Thomson Reuters UK Homebuilding index has fallen some 11 percent since a late February peak.

“Yesterday’s news gives welcome visibility and should boost the market’s confidence in our base case and target prices which project up to 66 percent potential returns across the sector,” HSBC analysts said in a note.

Bellway, Crest Nicholson and Taylor Wimpey are its top picks.

While the milder-than-expected measures prompted a relief rally, interest rate rises remain a risk for the housing market as Britain’s economy grows robustly, as seen in Friday’s GDP numbers.

Britain’s headline economic growth rate of 0.8 percent in the first quarter was not changed in revised official figures published on Friday, but the numbers did show faster growth in business investment than previously thought.

BoE Governor Mark Carney has raised the possibility of an interest rate rise later this year if wage growth picks up and economic growth does not slow down.

Elsewhere among the risers, Rolls-Royce advanced 1.4 percent on a Reuters report saying Airbus was set to upgrade its A330 planes with the aero-engine maker as an exclusive supplier.

The broader FTSE 100 index was up 0.1 percent at 6,742.94 points by 1132 GMT. However, the index was heading for a weekly drop after falling 1.2 percent this week.

Although the index rose on Friday, investors were reluctant to place big bets in the absence of new market catalysts and pending the second-quarter earnings season. Violence in Iraq also dampened appetite for riskier assets.

“Investors continue to search for the next crucial market catalyst. Central bank action and geopolitical events remain high on the agenda,” Hargreaves Lansdown analyst Keith Bowman said.

“Given the degree of uncertainty, a balanced diversified investment portfolio looks to remain important.” (Reporting by Tricia Wright and Atul Prakash; Editing by Ruth Pitchford)

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