Market snapshot: latest stock moves and Berkeley Group update

Each day is a crude reminder that investors are fearing the impact of an extended conflict, with the US dollar being a rare example of any buying interest.

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Despite the supply stimulus of the release of 400 million barrels of oil as announced by the International Energy Agency, a further 172 million barrels from the US and a temporary easing of sanctions on Russian oil already at sea, the price has remained stubbornly at or around $100. Even these measures will have little more than a temporary effect and the wider inflationary and global economic concerns remain front and centre as a result.

The pressure remains most visible on travel stocks, with the likes of Carnival and United Airlines enduring another punishing session, while the main indices each closed at their lowest level this year. The Dow Jones has now lost 2.9% in the year to date, the S&P500 2.5% and the Nasdaq remains at the bottom of the pile with a 4% decline.

The weak UK GDP reading was never going to lift spirits, and the flat reading which compared to growth forecasts of 0.2% did not even include any subsequent effects from the conflict in the Middle East. As such, the slew of central bank meetings next week will be complicated by the historic nature of the data currently coming through, and the subsequent upward pressure on inflation will leave most if not all to sit on their hands for the time being.

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Another drab opening for the FTSE100 saw investors continuing to nibble away at the progress which the premier index had been making. While the index remains ahead by 3% so far this year, the broader malaise has taken the FTSE250 into the red, with a decline of 2.2% contrasting with its bright progress up until a couple of weeks ago.

Another broad markdown saw internationally focused banks such as HSBC and Barclays under renewed pressure, alongside the more obvious targets including easyJet (LSE:EZJ). A dip in the gold price weighed on Fresnillo (LSE:FRES) and Endeavour Mining (LSE:EDV), while the only bright spots of note were unsurprisingly the oil majors, although the gains for BP (LSE:BP.) and Shell (LSE:SHEL) were somewhat half-hearted. For the moment, there seems little to entice investors back into the fold as they monitor developments, although at the headline level any losses across indices have been relatively muted so far.

Berkeley Group

In a brief trading statement, Berkeley Group Holdings (The) (LSE:BKG) maintained its previous guidance of full year pre-tax profit of £450 million and net cash of £300 million - notwithstanding the potentially debilitating effect of the US/Iran conflict on consumer confidence.

The current “Berkeley 2035” strategy represents a marathon, not a sprint. It has a number of strands, with the headlines being projected growth in the Return on Capital Employed, further investment in the group’s recently launched “Build to Rent” platform (“Berkeley Living”) and an ongoing focus on shareholder returns. Some £7 billion of free cash flow has been identified to underpin the strategy over the next ten years, including £5 billion of new investment, where the group plans to maintain its historic operating margin range of between 17.5% and 19.5%.

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In the meantime, the group’s focus on London and the South East has more recently been both a blessing and a curse. On the one hand, higher house prices following on from a systemic undersupply of homes, employment levels remaining strong and the recent round of wage rises (while inflationary) helped mitigate some of the effects of the economic backdrop.

However, more recently a red flag emerged from its September trading statement, where Berkeley revealed that new housing starts in London were currently at levels not seen since the Great Financial Crisis of 2008, even though it remained optimistic on the government’s more positive ambitions on planning permission and housing delivery, albeit at a slower pace than expected.

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For the moment, Berkeley finds itself wading through treacle given guarded consumer confidence and the possibility of higher for longer interest rates keeping some potential new buyers on the sidelines. Even though the revitalised planning system is in train, it will take some time to bed in. Berkeley noted a good level of sales enquiries, with underlying reservations edging back towards the pre-Budget lull.

The overarching concerns have fed through to a share price which has eked out a gain of 4% over the last year, as compared to a rise of 21% for the wider FTSE100, although the price remains down by 19% over the last two years. Of course, this is a highly cyclical sector and if nothing else, the perennial undersupply of homes in the UK will provide future opportunities. For now, the market consensus of the shares as a hold is reflective that for investors, the wait has been too long and there are potentially more attractive opportunities elsewhere in the sector.