Market snapshot: Berkeley Group, US jobs data and FTSE 100 movers

In a brief trading statement which provided some relief to a beleaguered share price, Berkeley Group Holdings (The) (LSE:BKG) reaffirmed its previous guidance and reiterated its commitment to the new “Berkeley 2035” growth strategy.

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The strategy is ambitious and, while the group has much in its favour, ultimately it operates in a cyclical sector which is currently constrained by the wider economic environment. For potential buyers, the level of interest rates and general affordability are under some strain.

Berkeley is on track to improve shareholder returns in the meantime, with £260 million of the £2 billion 2035 strategy completed and the next aim being a further buyback of £640 million by 2030.

However, a red flag has emerged from this statement which may trouble more cautious investors. Previously, the group had advantages arising from its primary focus on London and the South East. Higher house prices had followed from a systemic undersupply of homes, employment levels remaining strong and the recent round of wage rises (while inflationary) helping to mitigate some of the problems.

However, Berkeley has today revealed that new housing starts in London are currently at levels not seen since the Great Financial Crisis of 2008, even though it remains optimistic on the government’s more positive ambitions on planning permission and housing delivery.

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Perhaps more positively, the group has confirmed its year-end target for pre-tax profit of £450 million, already 85% secured and for a similar number the following year. Berkeley intends to retain £300 million of net cash by the end of the year also, giving some financial firepower if required. Nonetheless the current economic backdrop has overhung the sector for some time now without any obvious positive catalysts on the horizon.

These overarching concerns have been reflected in the share price performance, where a decline of 30% over the last year compares to a gain of 11.8% for the wider FTSE100. Indeed, Berkeley was probably fortunate to retain its premier index status in this week’s reshuffle and for the time being investors remain unconvinced by the recovery potential, with the market consensus stuck at a hold, albeit a strong one.

Market snapshot

Amid all the noise, US markets recovered their poise, with the benchmark S&P500 index reaching yet another record closing high.

Optimism is gaining on the most recent economic data, which has flung the door open to a Federal Reserve interest cut later this month. It may seem counterintuitive, but a lower than expected non-farm payrolls figure later today could well provide a further boost, as it would all but confirm investors’ suspicions that a reduction is forthcoming.

It would also provide a “Goldilocks” scenario whereby a cut is justified, without there being any warning lights for an imminent recession. The consensus is that just 75,000 jobs will have been added in August, which would compare with an equally anaemic reading of 73,000 the previous month.

In the meantime, the main indices continue their strong progress so far this year, with gains of 7.2%, 10.5% and 12.4% for the Dow Jones, S&P500 and Nasdaq respectively.

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A palpable sense of relief which moved onto Asian markets was then followed by a marginally stronger opening in London. Broker re-ratings were the order of the day, which weighed on the likes of NatWest Group (LSE:NWG) and Admiral Group (LSE:ADM) while boosting Entain (LSE:ENT) and Babcock International Group (LSE:BAB), the latter of which has now risen by an extraordinary 116% this year. Also contributing to the slight gain was strength in both Fresnillo (LSE:FRES) and Endeavour Mining (LSE:EDV), where a fresh round of strength given its haven status lifted the gold price once more.

The FTSE100 is now ahead by 12.8% in the year to date, and around 1% from its most recent record high. The index stands ready for any further market lurches elsewhere, since its dependability as a defensive play has increasingly come into its own over recent months.