Sharewatch: One day at a time

When the markets closed on Friday evening the weekly change in share prices looked minimal. However, if you followed the story on a day-by-day basis it was much more interesting.

On Monday and Tuesday some companies experienced a big uplift, only to crash back down again by Thursday and Friday.

Were national or international economic trends at play here? Or had a shock profit warning from one of the big boys caused a domino effect on shares in the rest of the sector?

Well, no. It was more a case of a “programme trade”. This is where an institutional investor such as a large fund manager decides to sell large amount of shares all at once, rather than staggering the sales over a longer period. The impact was that other traders knew there was a lot of stock on the market, and dropped their prices to compete. This is a technical cause of falls in share prices, rather than a reflection of business fundamentals. It is also, of course, a good opportunity to buy cheaply.

This volatile mood in the market had a temporary impact on quoted companies. For example, shares in housebuilder Barratt rose at the beginning of the week but on Thursday dropped more than 25p to 740p, which reflected a fall of less than 1% in the week overall. Contractor ROK Property dropped on Thursday but overall shares during the week actually rose by 2.1% to close at 444p.

The sector also had to contend with anticipated interest rate rises in Europe and the USA.

As would be expected, this dented confidence in UK stocks. However, few in the market are predicting similar rate rises here: the betting is that at worst they will remain the same. Moreover the strongly domestic focus of construction stocks shields them from much of the fallout experienced by other UK industries at times of international upheaval.

One other company worth mentioning last week was Galliford Try. After an upbeat trading statement at its annual general meeting, shares rose 5.5% to 76.75p.

Overall the All-Share rose 1.3% to 2610, outperforming the construction and building materials sector which rose 0.8% to 3592.