Housebuilders led the FTSE 100 declines yesterday after Berkeley warned that a “lack of urgency” in the property market was likely to continue until interest rates began to fall.
Higher rates have made potential buyers hesitate as they wait for borrowing costs to drop.
Berkeley shares fell 6.3 per cent, or 316 pence, to 4,694 pence, as the FTSE 100 made steady gains, rising 0.2 per cent, or 13.82 points, to 8,205.11.
Meanwhile, the FTSE 250 fell 0.1 per cent, or 28.88 points, to 20,381.05.
Market woes: Builders Berkeley, which focuses on developments in London and the south-east of England, reported an 8% drop in pre-tax profits to £557m.
Other homebuilders were also swept up. Khaki fell 2.8 per cent, or 39.5 pence, to 1,365 pence, Taylor Wimpey fell 2.5 per cent, or 3.65 pence, to 143.75 pence and Barratt fell 2.7 per cent, or 13.2p, to 468.7p.
Berkeley, which focuses on developments in London and the south-east of England, reported an 8 per cent drop in pre-tax profits to £557 million.
The builder said there were “signs that the outlook is improving” but chief executive Rob Perrins warned that “the current lack of urgency in the market is likely to remain until the long-awaited interest rate cut begins”.
Housebuilders also reacted to the inflation figures, which have further dashed hopes of a summer rate cut.
Also among the big losers yesterday was AstraZeneca. The pharmaceutical giant fell for a second day, falling 0.6 per cent, or 76 pence, to 12,340 pence, following the revelation that a breast cancer drug combination had failed in trials.
Stock Watch: Arrow Scan
Shares in oil and gas business Arrow Exploration soared following an upbeat update on one of its Colombian projects.
The AIM-listed company said production from its first horizontal well, the Carrizales Norte prospect in eastern Colombia, had exceeded expectations.
The company said the technology tested by this well boded well for future projects in the same area. The shares rose 15 per cent, or 3p, to 23p.
Smurfit Kappa led the blue-chip index, rising 4.8 per cent, or 172 pence, to 3,750 pence. The packaging business has been boosted ahead of its merger next month with Atlanta-based West Rock.
The boost came as it was confirmed that the combined company will be included in the US S&P Dow Jones indices.
Rival DS Smith also rose, rising 0.5 per cent, or 1.6p, to 352p.
Airline stocks were boosted by falling headline inflation.
“This could potentially give families more financial leeway to spend on booking seats for a place in the sun,” said Susannah Streeter, head of money and markets at investment platform Hargreaves Lansdown.
“It’s more encouraging for airlines, as there have been signs that consumers are starting to resist higher ticket prices.” British Airways owner IAG rose 1.2 per cent, or 2 pence, to 170.05 pence and EasyJet rose 0.7 per cent, or 3 pence, to 455.1 pence.
Royal carpet maker Victoria has bounced back after its auditors gave it the all-clear. Last year they had raised concerns about a subsidiary, citing concerns about money laundering rules. The shares rose 2.1 per cent, or 3.6p, to 175.6p.
Vodafone rose as it continues to help clear the way for its proposed merger with Three. It sold a larger-than-expected 18 percent stake in Indian telecom company Indus Towers. It currently holds a 3.1 percent stake.
This will raise £1.4bn, which Vodafone will mainly use to pay down its £1.5bn debt related to its Indian assets. The shares rose 1.4 per cent, or 1p, to 71.64p.
The watchdog is investigating its £15bn merger with Three, owned by Hong Kong group CK Hutchison.