FTSE gains as Persimmon and Lloyds boost recovery hopes

The blue chips were up this morning as a profit recovery at Lloyds boosted banking stocks while a positive update from Persimmon pulled housebuilders higher.

The FTSE 100 made solid gains this morning as a quarterly update from Lloyds (LLOY) prompted recovery optimism and propelled the banking giant to the top of the blue chips,while Persimmon (PSN) pulled housebuilders higher.

The main index was up 0.6% in early trading before moderating gains to 25 points, or 0.37%, to sit at 6,970 – still struggling to hit the 7,000 mark despite Lloyds reporting a pre-tax profit of £1.9bn in the first quarter, up from £74m this time last year.

Richard Hunter, head of markets at Interactive Investor, said Lloyds is seeing ‘the benefit of the rising tide of sentiment in the UK and its numbers reflect a recovery play in action’.

The share price has added 43% over the past year and it has enjoyed a 59% spike since the vaccine announcement in November.

‘With a steady hand on the tiller, the bank remains well regarded by investors, and the market consensus of the shares as a ‘buy’ will likely remain intact following this update,’ he said.

Lloyds pulled banking peers up behind it, with NatWest (NWG) adding 2.1% to 205p and Barclays (BARC) up 1.4% at 189p.

Housebuilders were also strong this morning thanks to a first-quarter update from Persimmon, which showed sales for the year so far were 23% above 2020 levels but also 11% above pre-pandemic 2019 levels too.

Ben Nuttall, senior analyst at Third Bridge, said housebuilders have benefited from ‘demand-side policies’ such as the stamp duty holiday and pent-up demand for housing as lockdown restrictions ease.

While the policies may help people get on the ladder, he said a ‘chronic undersupply of UK housing persists’ and these policies ‘mostly serve to drive up process, benefiting housebuilders like Persimmon’.

The housebuilder jumped 2.4% to trade at £32.23, with peer Barratt Developments (BDEV) following higher, up 2.2% at 786p.

On the FTSE 250 – which added 0.4%, or 88 points, to trade at 22,522 – property developers were also prominent winners, with Vistry (VTY) and Crest Nicholson (CRST) both up 2.2% to trade at £12.64 and 421p, respectively.

The biggest gainer on the mid-caps was Grafton (GFTU), which suppliers building materials and like the housebuilders has benefited from a strong housing market and also the rising number of people undertaking DIY and home renovations during lockdown. It soared 8.6%, or 94p, to £11.82 after it said it said full-year profit would exceed current consensus by 15-20%.

Revenue grew in both March and April this year but the group was, however, cautious about the second half of the year when it said there would be an impact from the normalisation of consumer spending patterns.

Trust news

Artemis Alpha (ATS ) leaped 6.9% to 433p after the UK All Companies trust, which traded on a wide 15% discount after earlier poor performance, said it was 52% weighted to ‘cyclical’ stocks geared to a reopening in the economy from lockdown. However, net asset value grew just 1.8% in the first quarter, behind the 5.25% rise in the FTSE All Share.

ICG Enterprise (ICGT ) delivered the latest in a run of strong private equity trust results. Its shares gained 2.5% to £11.24 after reporting a 22.5% total return on net assets in the year to 31 January, against a fall of 7.5% for the benchmark FTSE All Share index. Performance was driven by its technology and tech-enabled holdings such as Chewy, a US retailer of pet-related products, which gained 284%.

Riverstone Energy (RSE ) rose 7.5p or 2.7% to 286p as the North American focused private equity fund reported that it continued to pivot the portfolio to energy transition, narrowing slightly the very wide discount of 39% after a long period of poor performance.

Schroder British Opportunities (SBO ) stepped up 1.3p to 101.9p after announcing a £2.5m uplift to the carrying value of an unquoted portfolio company after a funding round, adding 3.3p to net asset value per share.

Vietnam Enterprise Investments (VEIL ) added 10.6p or 1.7% to 638.6p on cheering investors with annual results boasting a 22.8% total return on net assets last year, beating Vietnam’s VN index by 5.4% and benefiting from an economy boosted by increased foreign investment global brands such as Apple and Nintendo shifted manufacturing there.

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