Must read: share gains, Iran, UK jobs, Crest Nicholson

Global markets

European markets have opened cautiously higher following gains overnight for the Nikkei and a record high for Korea's Kospi index. The FTSE 100 has opened just above flat with Associated British Foods (LSE:ABF) at the bottom of the basket after announcing plans to separate Primark. UK housebuilders like Persimmon (LSE:PSN), Barratt Redrow (LSE:BTRW) and Berkeley Group Holdings (The) (LSE:BKG) are under pressure following Crest Nicholson Holdings (LSE:CRST)’s profit warning. Meanwhile, investors are rotating into defensive utilities like SSE and Centrica which are outperforming.

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Oil prices are softening after surging overnight, with shipping through the Strait of Hormuz still limited. Investors are feeling cautiously optimistic towards the potential for further negotiations between the US and Iran in Islamabad ahead of the two-week ceasefire deadline on Wednesday, although Iran hasn’t yet confirmed its attendance. President Trump said it ‘highly unlikely’ the Iran ceasefire will be extended without a deal. 

In the United States, investors await a Senate confirmation hearing for Trump’s nominee as the next Federal Reserve chair Kevin Warsh. And in corporate news, Apple Inc (NASDAQ:AAPL) has announced Tim Cook’s replacement as CEO. Hardware boss John Ternus will take on the top job after Cook’s 15-year period in charge. 

UK unemployment 

The UK unemployment rate fell to 4.9% in the three months ending in February versus 5.2% in the previous three months. However, regular wage growth hit a five-year low of 3.8% and vacancies also fell to the lowest in nearly five years. 

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This data represents the period before the onset of the Iran war, with the improved unemployment rate providing some calm before the storm. The labour market is expected to deteriorate as the Middle East conflict pushes inflation higher and weighs on growth. For the Bank of England, the threat of stagflation has led to a higher-for-longer interest rate outlook, a sharp reshaping of expectations since pre the war when inflation was heading back towards the 2% target and interest rates were pointing lower.

Crest Nicholson

Crest Nicholson said macro uncertainty has increased, with the Middle East conflict leading to a prolonged higher interest rate environment, renewed cost pressures and a deterioration in consumer confidence. It now anticipates a reduced number of land sales with revenue slashed to £40 million versus £75-100 million previously. It also issued an aggressive profit warning, reducing its full-year underlying profit guidance to between £5 million and £15 million from its prior estimate for between £42 million to £52 million, around an 80% decrease. 

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This is a very bleak update from Crest Nicholson, underscoring how the Iran war and the energy crisis have created painful headwinds for the housebuilding sector. Interest rate sensitivity among housebuilders means that the conflict’s inflationary impulse not only adds to significant build cost pressures from higher energy, but also threatens the demand outlook as the higher-for-longer outlook for interest rates dampens mortgage affordability and softens demand for borrowing. 

Shares have taken a brutal hit today, shedding around 40%, the biggest drop on record, reflecting the profit warning and deteriorating sales outlook.