Last Friday, the FTSE soared to its highest value for two months in response to what looked likely to be a short war. These gains were wiped out on Monday as it became clear that the coalition's briefings had been optimistic. However, construction firms rose further and fell less than the FTSE average.
Mike Foster, an analyst with KBC Peel Hunt, said that the construction sector was showing signs of stability in an uncertain market. He said: "The contractors have held up pretty well and outperformed the market."
He added that he was cautious about the effect of hostilities on Amec and Balfour Beatty owing to their exposure to the slowing global market. He said: "Balfour Beatty and Amec will be most affected. Amec has positives and negatives, but in the current market you have got to be cautious."
Other analysts said the two companies would be well positioned to win work in the Middle East once the war was over.
Balfour Beatty and Amec will be the most affected
Mike Foster, City analyst
Amec's share price rose 8.1% to 200p last week and Balfour Beatty soared 13.6% to 165p, although part of these gains were eaten into on Monday, following the market trend.
JM Finn analyst Leslie Kent said that the domestic nature of much of the sector would mean that it was insulated against the impact of war.
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