London’s blue chip index extended gains, closing 0.1% higher despite a surprise announcement from the Bank of England stating that funding for lending for households will end in 2014. Under the guidance banks will no longer receive subsidised funding which had been used to encourage mortgage lending and personal loans, instead chancellor George Osborne and BoE governor Mark Carney have decided to focus efforts on funding subsidies for SMEs.
Shares in British homebuilders dropped sharply on the news; Barratt Development, Persimmon Plc. and Bellway Plc. were among the worst performers, closing down 5.5%, 6.5% and 5.86% respectively with Barrett trading as much as 10% lower at one point before recovering somewhat throughout the afternoon. Bloomberg’s UK homebuilder index dropped 5% as developers opened significantly lower.
Wider European markets were supported higher as investors continued to digest the better than expected labour market conditions in the US. Both the CAC and DAX closed 0.25% and 0.4% higher as early gains were buoyed by a strong US session yesterday. With US markets closed for Thanksgiving, upward momentum from the Asian session continues uninterrupted.