A case of the jitters

Shares across the sector dipped again last week. It might have been the result of takeover talk dying down, but another explanation behind the fall could be a case of investors’ nerves, a condition that sporadically hits quoted companies.

As the government prepares to call a general election, widely expected to be held on 5 May, there is a sense of unease in the air. Partly it’s being fuelled by noises coming from Mervyn King, governor of the Bank of England. Some bank-watchers are speculating that we could be in for a big surprise, with a rise in interest rates coming in the politically sensitive pre-election period.

Although a rate rise is still a possibility, it is more likely that nerves are simply on edge because of King’s inferred warning. But do not assume interest rates will go down.

All this uncertainty affected the housebuilders last week, with many of them registering a fall in their share prices. Taking a longer term view, however, the downward pressure is likely to encourage consolidation among the more acquisition-hungry members of the sector.

Shares in Taylor Woodrow dropped 4% to 291p and Redrow was hit by a 3.6% drop to 417.5p.

However, housebuilders have become accustomed to share-price fluctuations of late, and will not be unduly worried as the busy reporting season gets under way, kicked off this week by GEORGE Wimpey (page 18).

It was not a good week for contractors, either. Balfour Beatty, one of the biggest companies in the sector with a market capitalisation of £1.34bn, was one of the worst performers. Shares dropped 6.4% to 316.5p as the start of the Hatfield rail crash corporate manslaughter case made the news. Although Balfour Beatty is considered to be a darling of the City, the negative attention inevitably had an impact. The board will hope it’s temporary.

Shares in Mowlem continued to fall, down 4% to 204.25p after the news two weeks ago that it had made a £7.5m loss in 2004 compared with a £45.2m profit in 2003.

There was little to cheer the sector overall, with only modest price rises among few companies. The All-Share was unchanged last week at 2535, whereas construction and building materials shares fell 1% to 3523.

Angela Monaghan is business editor